Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 88.52 Crs. of Globe Textiles (India) Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (23 Apr 2020) |
Present | ||
Fund Based | 56.70 | 79.78 | Long Term |
BWR BBB- (Stable)
Reaffirmation |
BWR BBB -
/Stable Reaffirmation |
(0.00) | (5.00) | ||||
(0.00) | (5.00) | ||||
Non Fund Based | 8.75 | 8.74 | Short Term |
BWR A3
Reaffirmation |
BWR A3
Reaffirmation |
Grand Total | 65.45 | 88.52 | (Rupees Eighty Eight Crores and Fifty Two lakhs Only) |
BWR has considered the standalone financials of the Company and essentially relied upon the audited financial statements up to FY21, Projected financials up to FY22 and publicly available information and clarifications provided by the entity’s management.
The rating reaffirmation draws strength from a modest level of sales and moderate financial risk profile. The Company also benefits from the vast business experience of about two decades of the promoters in the line of the textile industry. Profit margins are impacted due to the Covid-19 pandemic and slowdown in the demand. Though, there was a decline in export business in FY21, the scale of operation remained stagnant since the last three fiscals. The Company faces the thin profitability on account of the susceptibility to volatility prevailed in textile market during the pandemic, forex fluctuation and intense competitive industry. Also, the working capital cycle remained stretched due to the nature of business.
BWR believes that the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
Established in 2006, GTIL' operations are managed by Mr Bhavik Parikh and Mr Nilay Vora, who have more than a decade of experience in the textile business. The company benefits from longstanding existence in the industry and business supports healthy relationships with customers and suppliers. Over a period of time, the company has established market in domestic as well as internationally.
The company has reported a total operating income of Rs. 259.09 Crs in FY21 against Rs. 265.17 Crs in FY20. TOI comprises of 45% of export in FY20 & 23.20% in FY21 to countries like UAE, Thailand, Singapore etc. The operational income was affected in fiscal 2021 on account of overall slowdown due to the COVID-19 pandemic worldwide and fluctuation in demand. Going forward, the longstanding relationship with customers and healthy capacity utilization levels will remain helpful for stable operations.
GTIL's financial risk profile is moderate reflected by healthy capital structure and absence of any major long term liabilities. Due retained profits of past years, the tangible net worth is Rs. 42.76 Crs in FY21. Debt /TNW is marginally deteriorated from 1.42x in FY20 to 1.66x in FY21 due to enhancement in working capital facilities and thereby increased utilization.
Credit Risks:
The textile industry is highly fragmented and competitive with the presence of many organized and unorganized players. GTIL’s margins remain vulnerable to fluctuation in the key raw material prices, forex rates and demand of garments, bedsheets etc in the local and international market. As a result, the operating profit margins have remained thin at 4.40% and 1.68% & net profit margin at 1.68% and 0.10% in FY20 & FY21 respectively. Debt protection metrics remain weak below 1x due to thin margins.
The company's operations are characterized by the high working capital intensity business due to holding a large inventory between 2-3 months. Receivable days remained high at 111 and 147 days in the last two fiscals. However, the moderate utilization of cash credit in the last six months on the back of the covid line of emergency imparts some comfort.
Positive: Substantial and sustained growth in operating income as per the projection, significant improvement in the profitability and better management of working capital cycle.
Negative: Deterioration in operating and net margin, stretched working capital cycle driven by a pile-up of inventory or elongated receivables impacting the liquidity.
LIQUIDITY INDICATORS - Adequate
GTIL'S liquidity remained adequate in the absence of any major long term liability over the medium term. The company has generated net cash accruals of Rs. 3.88 Crs in FY20 and Rs. 2.06 Crs in FY21. The entity has availed the Covid line of emergency of Rs. 9.25 Crs, which will support the liquidity in the near term. Average cash credit limit utilization remained moderate above 60% in the last 6 months ending on 30.6.2021. Current Ratio is comfortable at 1.16x in FY21. The operation is working capital intensive, hence efficient management will remain a key rating sensitivity in the current fiscal.
ABOUT THE ENTITYIncorporated in 2006,Globe Textiles (India) Limited, is a NSE listed company promoted by Mr Bhavin Parikh and Mr Nilay Vora. Listing of equity shares of the Company has been migrated from NSE (SME EMERGE) to Capital Market Segment (Main Board) w.e.f. 07th October, 2020 vide listing and trading approval letter NSE/LIST/58 dated 05th October, 2020. GTIL is a manufacturer and exporter of readymade garments , bedsheets and fabrics such as yarns, printed fabrics, denim fabrics etc. The company has a manufacturing unit- at Ahmedabad and export unit at the Special Economic Zone(SEZ) .
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 259.09 | 265.17 |
EBITDA | Rs.Crs. | 4.35 | 11.66 |
PAT | Rs.Crs. | 0.25 | 4.44 |
Tangible Net Worth | Rs.Crs. | 42.76 | 43.08 |
Total Debt/Tangible Net Worth | Times | 1.66 | 1.42 |
Current Ratio | Times | 1.16 | 1.19 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 79.78 |
BWR BBB-/Stable
(Reaffirmation) |
23Apr2020 |
BWR BBB- (Stable)
(Reaffirmation) |
19Feb2019 |
BWR BBB- (Stable)
(Assignment) |
NA |
NA
|
FB SubLimit | LT | (5.00) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
(5.00) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Non Fund Based | ST | 8.74 |
BWR A3
(Reaffirmation) |
23Apr2020 |
BWR A3
(Reaffirmation) |
19Feb2019 |
BWR A3
(Assignment) |
NA |
NA
|
Grand Total | 88.52 | (Rupees Eighty Eight Crores and Fifty Two lakhs Only) |
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
---|---|---|---|---|---|---|
1 | Bank of Maharashtra | Cash CreditSanctioned | 42.00 | _ | 42.00 | |
2 | Bank of Maharashtra | Credit Exposure Limit (CEL)Sanctioned | _ | 1.87 | 1.87 | |
3 | Karur Vysya Bank | Covid -19 Emergency Line CreditSanctioned | 7.25 | _ | 7.25 | |
4 | Karur Vysya Bank | Term LoanOut-standing | 0.53 | _ | 0.53 | |
5 | Karur Vysya Bank | Cash CreditSanctioned | 10.00 | _ | 10.00 | |
Sub-Limit (OCC) | (5.00) | |||||
Sub-Limit (PCL/PCFC/FBN/P/EBD/N) Sanctioned | (5.00) | |||||
6 | Karur Vysya Bank | Credit Exposure Limit (CEL)Sanctioned | _ | 1.87 | 1.87 | |
7 | Union Bank of India | Cash CreditSanctioned | 18.00 | _ | 18.00 | |
8 | Union Bank of India | ILC/FLC/BGSanctioned | _ | 5.00 | 5.00 | |
9 | Union Bank of India | Covid -19 Emergency Line CreditSanctioned | 2.00 | _ | 2.00 | |
Total | 79.78 | 8.74 | 88.52 | |||
TOTAL (Rupees Eighty Eight Crores and Fifty Two lakhs Only) |
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