Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 60.02 Crs. of Numero Uno Clothing Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (21 Jul 2020) |
Present | ||
Fund Based | 55.00 | 60.02 | Long Term |
BWR BBB-/Stable
Assignment |
BWR BBB -
/Stable Reaffirmation |
Grand Total | 55.00 | 60.02 | (Rupees Sixty Crores and Two lakhs Only) |
Brickwork Ratings (BWR) reaffirms the long-term rating at BWR BBB- (Stable) for the bank loan facilities of Numero Uno Clothing Ltd. (NUCL or the company).
The rating reaffirmation factors in the company’s experienced management and established brand name, comfortable ISCR and DSCR ratio, improved profit margins,comfortable capital
structure and Debt/EBITDA ratio,besides diversified customer base. The rating is however constrained by declined scale of operations, working capital-intensive nature of the business and fierce competition in the ready-made garments segment.
The Outlook has been Stable as the company has been able to register sales of approximately Rs 47.46 Crs in 6MFY21 against Rs 16.76 Crs in 6MFY20. The company is expected to have improved sales in the next 6 months due to the coming festive seasons and improved demand.
KEY RATING DRIVERSCredit Strengths:
Promoters of the company are experienced with more than two decades of industry experience in the same line of business. They have seen multiple business cycles. Numero Uno is an established brand in the Northern markets like Delhi NCR, Haryana, Punjab etc. The company sells a full range of garments for men and women and has summer as well as winter collection under their brand. In addition to garments it also sells accessories like wallets, watches, shoes etc. making it a one stop solution for the families. The company sells through almost all the known retail channels like large format stores, owned outlets, exclusive outlets, shop in shops, though online retailers and own website as well.
Operating margin and net margin of the company has improved from 5.83% and 0.82% in FY20 to 8.50% and 1.11% in FY21 respectively. Current ratio for the company stood at 2.57x in FY21 (2.34x in FY20) indicates the ability of the company to meet its current liabilities from its current assets.
The company is selling through all formats such as exclusive stores, large format stores, online etc. Currently the company is dealing through 276 exclusive business outlets and this includes 51 stores as company owned and company operated stores (COCO). Further, the company has presence in all four zones through multiple business outlets ( 175 MBO’s ). Recently the company has added up with 9 stores of Metro Cash & Carry India ltd having their presence on a pan India basis. Existing customer base is well diversified with top 10 customers contributing <30% of the total sales. During the last couple of years, the company has expanded to Southern and Eastern markets.
The company has ventured with Central Police Canteen (CPC) and Central Stores Department (CSD) coming under the control of Ministry of home affairs to supply apparels on regular basis.The company has been granted registration with CPC and and currently the company has received 1st order of more than 17000 pieces for denim, shirts etc.. For CSD, a file has been submitted and accepted and further process is awaited for finalization of the deal. The company also got ISO 9001:2015 certificate.
The company revenue declined from Rs 186.22 Crs in FY20 to Rs 147.65 Crs in FY21 due to the impact of Covid-19 pandemic. The company has registered sales of approximately Rs 47.46 Crs in 6MFY21.
Marked by high inventory levels and high days receivables, operations in this industry segment are capital intensive in nature. Impact of Covid -19 has also increased the inventory and receivable levels in FY21. Conversion cycle is stretched at 388 days in FY21 (325 days in FY20), due to an elongated debtors period of 291 days and inventory period of 207 days in FY21. Inventory and receivables period is high due to the business model where the company has to maintain high inventory on account of seasonal and festival sales and receivables realized once the sales is done in store outlets, however debtors stand on the balance sheet from the date of dispatch/supply to the stores where the company doesn't own outlets/stores. In addition to that Covid 19 has impacted the operating cycle also to an extent.
Marked by presence of large numbers of branded and unbranded retailers and high discounts becoming the new normal, effective working capital management will be the key thing to watch out for.
BWR has factored in the standalone business parameters and financial risk profile of the trust to arrive at the rating. Reference may be made to the detailed Rating Criteria hyperlinked
RATING SENSITIVITIES
Upward: The rating outlook may be revised to 'Positive' or rating may be ‘Upgraded’ in case the company reports considerable improvement in topline number and operating cycle, coupled with improvement in profitability margins as well.
Downward: The rating outlook may be revised to 'Negative' or rating may be Downgraded’ in case the company reports further decline in topline numbers, besides further stretch in the operating cycle and decline in profitability margins will also be considered negative.
The company had cash accruals (profit after tax + depreciation) of Rs 5.73 Crs in FY21 against current portion of long-term debt (CPLTD) of Rs 0.68 Crs in FY21 and BWR is expecting cash accruals of above Rs 5 Crs against CPLTD of Rs 1.01 Crs for FY22. The company had cash and cash equivalents of Rs 5.38 Crs in FY21. The average working capital utilization for the last 6 months ( till Aug 2021) is approximately 80%-90%.
ABOUT THE ENTITYNumero Uno Clothing Limited (NUCL) was set up by Mr Narinder Singh Dhingra in 1980 as a proprietary concern, Hi-Fashion Clothing Co, and was reconstituted as a private limited company with the present name in 2006. The company manufactures a complete range of readymade garments for men and women segments. Numero Uno Brands Ltd (NUBL), a 100% subsidiary of NUCL, which commenced operations in fiscal 2014, supplies garments in bulk, mainly to institutional clients. It purchases most of its garment requirements from NUCL.
NUCL has its registered office at Paras Trade Centre, Gurugram Faridabad Toll Road Gurugram - 122 003, Haryana. The company has a ~50,000 sq ft warehousing facility at Manesar gurgaon and manufacturing facility at Salqui Industrial Area Dehradun.
Numero Uno is an established brand in the denim segment, especially in the National Capital Region (NCR), and has a healthy retail presence in the region as well.
Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 147.66 | 186.23 |
EBITDA | Rs.Crs. | 12.55 | 10.86 |
PAT | Rs.Crs. | 1.64 | 1.53 |
Tangible Net Worth | Rs.Crs. | 119.42 | 117.70 |
Total Debt/Tangible Net Worth | Times | 0.41 | 0.45 |
Current Ratio | Times | 2.57 | 2.34 |
NA
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 60.02 |
BWR BBB-/Stable
(Reaffirmation) |
21Jul2020 |
BWR BBB-Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
Grand Total | 60.02 | (Rupees Sixty Crores and 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 | |
---|---|
Raman Thakur Senior Rating Analyst Board : +91 11 2341 2232 raman.t@brickworkratings.com |
Tanu Sharma Director - Ratings tanusharma@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 | Federal Bank | Cash CreditSanctioned | 5.00 | _ | 5.00 |
2 | HDFC Bank | Term LoanOut-standing | 2.42 | _ | 2.42 |
3 | HDFC Bank | Cash CreditSanctioned | 25.00 | _ | 25.00 |
4 | HDFC Bank | GECLSanctioned | 4.00 | _ | 4.00 |
5 | Yes Bank | Cash CreditSanctioned | 20.00 | _ | 20.00 |
6 | Yes Bank | GECLSanctioned | 3.60 | _ | 3.60 |
Total | 60.02 | 0.00 | 60.02 | ||
TOTAL (Rupees Sixty Crores and Two lakhs Only) |
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