Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 17.25 Crs. of Seasons Textiles Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (21 Aug 2020) |
Present | ||
Fund Based | 14.00 | 14.00 | Long Term |
BWR BB/Stable
Reaffirmation |
BWR BB -
/Stable Downgrade |
Non Fund Based | 3.25 | 3.25 | Short Term |
BWR A4
Reaffirmation |
BWR A4
Reaffirmation |
Grand Total | 17.25 | 17.25 | (Rupees Seventeen Crores and Twenty Five lakhs Only) |
BWR has downgraded / reaffirmed the ratings of M/s Seasons Textiles Limited to BWR BB- (Stable) / A4 deriving its strength from the experience of the management and moderate orders in hand. However the rating is constrained by the stagnant, small and declining scale of operations, moderate financial risk profile, decreasing profitability margins and profitability susceptible to fluctuations in raw material prices. The company’s revenues have been impacted since March 2020 owing to the nationwide lockdown, imposed by the Indian Government to contain the Covid-19 outbreak, and weak offtake from customers across markets. The textile industry is expected to be more vulnerable, given its sensitivity to consumer demand and sentiment, as well as the labour- intensive nature of manufacturing operations
KEY RATING DRIVERSCredit Strengths:
The company was incorporated in 1988 by its promoters , Mr. Inderjeet Wadhwa and Mrs. Neelam Wadhwa. Both are graduates and hold more than three decades of experience in the textile industry. The company has established a presence in the industry for the past 34 years, which helps them in maintaining long term relationships with their customers and suppliers in the industry.
The tangible net worth of the company is Rs. 21.10 Cr in FY21. The Gearing ratio of the company is comfortable at 1.29x for FY 21. The current ratio of the company is moderate at 2.83x for FY 21.
The company’s scale of operations during FY21 marked by total operating income has majorly declined and stood at Rs.17.12 crores as compare to Rs. 33.59 crores in FY20 is on account of lower intake of the orders from the existing customers followed by halt of business operations in the March-2020 to May 2020 due to COVID-19 pandemic lockdown.The small scale limits the company’s financial flexibility in times of stress and deprives it from scale benefits. The company has achieved TOI of Rs.9.00 crore till 31st Aug 2021.
The debt protection metrics stood weak with an ISCR of 1.32 times and DSCR of 0.74 times in FY21 as compared to ISCR of 1.49 times and DSCR of 0.97 times in FY20. The Conversion cycle of the company is on the higher side with 614 days owing to high inventory holding days of 593 days in FY21.
PAT has declined from losses of Rs. 0.21 Cr in FY20 to further losses of Rs. 0.80 Crores. Subsequently, the net profit margin has also decreased to Loss margin of 4.66% in FY21 from loss at -0.61% in FY20. The operating margin stood 21.80% in FY21 as compared to 13.53% in FY20.
Margins remain vulnerable to yarn price movements, which are governed by regulatory changes pertaining to cotton export and minimum support price (MSP). Fluctuation in yarn prices will impact the company’s margins as yarn is the key input cost. The textile trading industry is extremely fragmented and dominated by numerous small players, thereby limiting the ability to pass on rise in prices to customers.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its working capital requirement would be the key rating sensitivities.
Positive : The rating may be revised if the company is able to significantly improve its profitability, debt protection matrix and also substantially improve its order book. Negative : The rating may be downgraded if there is a delay in debt servicing, substantial decline in revenues and deterioration in the liquidity profile of the firm. LIQUIDITY INDICATORS - Stretched
Cash and cash equivalents is Rs. 0.89 Cr for FY21. The current ratio of the company is comfortable at 2.83 times in FY21. The expected net cash accruals of the company as per Proj. FY 22 is comfortable at Rs. 2.55 Cr as against the CPLTD of Rs. 2.52 Cr as per FY 21. The Conversion cycle of the company is on the higher side with 614 days owing to high inventory holding days of 593 days in FY21. The debt protection metrics stood weak with an ISCR of 1.32 times and DSCR of 0.74 times in FY21. As per the Banker’s Feedback, average utilization is 70%. Considering the above mentioned points, the liquidity position of the company is considered as stretched.
ABOUT THE ENTITYSeasons Textile Ltd (STL or “the company”) was established in 1986 and has been operating since 34 years. The company is involved in the business of manufacturing of Furnishing Fabrics/Technical Textiles (Flame Retardant). Their manufacturing unit is located in Sonepat, Haryana. The total installed capacity of their manufacturing unit is 16,80,000 meters per year. Seasons Textile generates majority of its revenue from export sales. Their export to domestic sales ratio is 60: 40.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 17.12 | 33.59 |
EBITDA | Rs.Crs. | 3.73 | 4.54 |
PAT | Rs.Crs. | -0.80 | -0.21 |
Tangible Net Worth | Rs.Crs. | 21.10 | 21.72 |
Total Debt/Tangible Net Worth | Times | 1.29 | 1.13 |
Current Ratio | Times | 2.83 | 2.25 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 14.00 |
BWR BB-/Stable
(Downgrade) |
21Aug2020 |
BWR BBStable
(Reaffirmation) |
29Aug2019 |
BWR BBStable
(Reaffirmation) |
23Aug2018 |
BWR BBStable
(Reaffirmation) |
Non Fund Based | ST | 3.25 |
BWR A4
(Reaffirmation) |
21Aug2020 |
BWR A4
(Reaffirmation) |
29Aug2019 |
BWR A4
(Reaffirmation) |
23Aug2018 |
BWR A4
(Reaffirmation) |
Grand Total | 17.25 | (Rupees Seventeen Crores and Twenty 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 | |
---|---|
Nisha Nagar Ratings Analyst nisha.n@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@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 | Canara Bank | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned | 4.05 | _ | 4.05 | |
2 | Canara Bank | Packing Credit (PC)Sanctioned | 6.20 | _ | 6.20 | |
3 | Canara Bank | FDB/FBESanctioned | 3.75 | _ | 3.75 | |
4 | Canara Bank | Letter of CreditSanctioned | _ | 3.00 | 3.00 | |
5 | Canara Bank | Bank GuaranteeSanctioned | _ | 0.25 | 0.25 | |
Total | 14.00 | 3.25 | 17.25 | |||
TOTAL (Rupees Seventeen Crores and Twenty Five lakhs Only) |
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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