Brickwork Ratings removes from issuer not cooperating category and upgrades the ratings, with a stable outlook, for the Bank Loan facilities aggregating Rs.36.85 Crs of Adoratex .
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (01 Feb 2021) |
Present | ||
Fund Based | 11.00 | 11.00 | Long Term |
BB
/Stable Downgrade/Issuer Non Cooperating |
BWR BB +
/Stable Upgrade |
25.85 | 25.85 | Short Term |
A4
Downgrade/Issuer Non Cooperating |
BWR A4 +
Upgrade |
|
Grand Total | 36.85 | 36.85 | (Rupees Thirty Six Crores and Eighty Five lakhs Only) |
Credit Strengths:
Mr. Rizwan Ansari, the promoter, has a long experience of over 2 decades in the carpet manufacturing undustry and this has helped the firm to establish a strong brand image that has culminated into repeat orders from overseas buyers.
The firm’s manufacturing facility is located in Bhadohi, UP, which is one of the largest hubs in India for floor coverings and is a readily available market for these products. Badhohi has numerous clusters of carpet manufacturing units. Further, skilled labor is also available by virtue of it being situated in the carpet manufacturing cluster.
ISCR and DSCR of the firm continue to remain at moderate levels though the same marginally declined due to decline in EBITDA in FY20. ISCR and DSCR stood at 2.89x and 2.76x respectively in FY20 (PY: ISCR of 2.96x and DSCR of 2.51x). Further, on the back of improved EBITDA, the ISCR and DSCR has improved to3.75x and 3.82x in FY21 (Prov)
Analysed gearing of the firm viz TOL/TNW ratio has consistently stood high above 3x in FY20 on account of substantially high advances given to sister companies aggregating to Rs.66Crs in FY20.
The Indian carpet industry is characterized by numerous small players and is concentrated in the northern part of India, which includes Kashmir, Jaipur, Panipat, Agra and Bhadohi, Mirzapur contributing a significant portion of India’s total carpet production. Low entry barriers and low investment requirements make the hand-knotted/tufted carpet industry highly lucrative and thus competitive. The firm also faces stiff competition from cheaper carpet imports from China in the same product segment.
The firm’s revenue profile is concentrated overseas, whereas procurement is in the domestic market. Further, the firm’s profitability profile is also exposed to volatility in foreign exchange on account of the absence of a board approved hedging policy. Any adverse movement in raw material prices of cotton and woolen yarn and foreign currency will have a negative impact on the firm’s scale of operations and cash accruals. However, the price volatility effect is partially set off as the promoter is well experienced in his trade.
TOI of the firm has witnessed a consistent decline since FY17 and has registered a negative CAGR of 10.23% for the year 17~21. In FY20, the same stood at Rs.108.65Crs ( export sales of Rs.12.71Crs) vis a vis Rs.113.04Crs in FY19( export sales of Rs.25.58Crs) registering a decline of 4.37% in FY20. The revenue has further declined to Rs.98.50Crs in FY21 (Prov) from Rs.101.10Crs in FY20. The decline in sales is due to trade-related disruptions due to COVID 19.
BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Positives: The rating is sensitive to the achievement of projected revenues, improvement in profitability margins and receipts of advances given to sister companies besides other factors favouring an upgrade.
Negatives: An adverse rating action may be taken in case the firm’s revenues and margins deteriorate from the current levels.
LIQUIDITY INDICATORS - Adequate
The utilization levels of the working capital limits stood at 93%. Further, the Cash accrual is expected at Rs 6.11Crs, against a negligible debt obligation of less than Rs1 Crs in FY22. The firm also has an unencumbered fixed deposits of Rs.0.16 Crs as of 31 Mar 2021. Further, the since past three FYs the firm has reported adequate EBITDA to service the interest obligations.
ABOUT THE ENTITYAdoratex formerly known as Rizwan Export House is one of the sister concerns of Kasatex Home Furnishing Pvt limited (formerly known as Sheikh Bhullan and Sons). The firm was incorporated in 2000 as a proprietorship concern, by Mr.Rizwan Ansari. The firm manufactures and exports handmade rugs, carpets, and home furnishing products, made of wool, cotton, and leather. The manufacturing facility is in Bhadohi, Uttar Pradesh.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 101.10 | 118.65 |
EBITDA | Rs.Crs. | 8.04 | 9.75 |
PAT | Rs.Crs. | 2.70 | 3.34 |
Tangible Net Worth | Rs.Crs. | 86.49 | 84.50 |
Total Debt/Tangible Net Worth | Times | 0.44 | 0.46 |
Current Ratio | Times | 1.91 | 1.97 |
Crisil for the rated debt of Rs.40Crs and has assigned a rating of B+/Stable/A4 under Issuer non-cooperating category on 16 Jun 2021.
ANY OTHER INFORMATIONNil
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)Facilities | Current Rating (2021) | 2021 (History) | 2020 | 2019 | 2018 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 11.00 |
BWR BB+/Stable
(Upgrade) |
01Feb2021 |
BB/Stable
(Downgrade/Issuer Non Cooperating) |
14Jan2020 |
BB+/Stable
(Reaffirmed) |
25Sep2019 |
BB+/Stable
(Issuer Non Cooperating) |
15Jan2018 |
BB+/Stable
(Assigned) |
Fund Based | ST | 25.85 |
BWR A4+
(Upgrade) |
01Feb2021 |
A4
(Downgrade/Issuer Non Cooperating) |
14Jan2020 |
A4+
(Reaffirmed) |
25Sep2019 |
A4+
(Issuer Non Cooperating) |
15Jan2018 |
A4+
(Assigned) |
Grand Total | 36.85 | (Rupees Thirty Six Crores and Eighty Five 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 | |
---|---|
Neha Jain Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@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 | Jammu and Kashmir Bank | Cash CreditSanctioned | 11.00 | _ | 11.00 |
2 | Jammu and Kashmir Bank | Packing Credit (PC)Sanctioned | _ | 16.85 | 16.85 |
3 | Jammu and Kashmir Bank | Post ShipmentSanctioned | _ | 9.00 | 9.00 |
Total | 11.00 | 25.85 | 36.85 | ||
TOTAL (Rupees Thirty Six Crores and Eighty Five lakhs Only) |
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