SVP Global Ventures Limited

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 65.34 Crs. of SVP Global Ventures Limited (SVPGVL or 'The Company').

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (25 Nov 2020)	Present
Fund Based	74.50	65.34	Long Term	BWR BB/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BBB /Stable Upgrade
Non Fund Based	(21.00)	(21.00)	Short Term	BWR A4 Downgrade/ISSUER NOT COOPERATING*	BWR A3 + Upgrade
Non Fund Based	(2.50)	(2.50)	Short Term	BWR A4 Downgrade/ISSUER NOT COOPERATING*	BWR A3 + Upgrade
Grand Total	74.50	65.34	(Rupees Sixty Five Crores and Thirty Four lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: *Issuer did not cooperate; based on best available information.

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has upgraded the ratings on the Bank Loan Facilities of SVPGVL to 'BWR BBB/Stable/BWR A3+' from 'BWR BB/Stable/ BWR A4; ISSUER NOT COOPERATING'.

The upgrade reflects an improvement in the company’s business risk profile, established market position, extensive experience of promoters, a diversified & growing customer base, long-standing relations with the customers, and order book providing medium-term revenue visibility. These rating strengths are partially offset by the susceptibility of operating profitability to volatility in the price of cotton, intense competition inherent in the industry, and a moderate financial risk profile.

BWR has essentially relied upon the company's audited financial results up to FY21, provisional financials of H1FY22, projections till FY23 as well as publicly available information and the information/clarifications provided by the company.

Outlook: Stable

BWR believes that SVPGVL’s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Improved business risk profile :
For H1FY22, the consolidated revenues improved by over 70% y-o-y to Rs. 817.60 crores. Operating margins significantly improved to 22.5% in H1 FY22 as against 11.8% in H1 FY21 and 16.4% in FY21. The company posted a net profit of Rs. 80.04 crore (PAT Margin 9.8%) with a growth of 271%, as against a net loss of Rs.46.69 crore in H1FY21, mainly on account of Covid induced lockdown. The current performance showcases the recovery along with benefits achieved from the capacities added through the new subsidiary in Oman along with healthy offtake and rising demand.
Diversified customer base, long-standing relations, and healthy orders :
The company has a long-standing relationship of over a decade with the existing customers which ensures repeat orders, and the strong relationship with vendors ensures limited inventory-related risk. A diversified customer base, policy of limiting credit exposure to a single customer, and moderate credit period offered, provide a safeguard against counterparty credit risks. Further, SVPGVL has recently added global giants such as IKEA and Zara to their customer list by becoming their authorized suppliers, which in turn has enabled the company to generate an order book of over Rs 5000 crore thus providing revenue visibility over the medium term.
Established market position and Extensive experience of promoters :
SVPGVL benefits from its established market position, supported by the extensive experience of the promoters of more than four decades and an established track record in the cotton yarn industry. The company has an aggregate manufacturing capacity of 4,00,000 spindles and 5900 rotors in India and Oman through its subsidiaries. A strong market presence and relationships with stakeholders will help to sustain the business risk profile.

Credit Risks:

Moderate financial risk profile :
The financial risk profile is moderate, marked by moderate debt protection metrics and leveraged capital structure. Debt protection metrics, indicated by interest coverage and debt service coverage ratios of 1.87 times and 1.38 times, respectively, in fiscal 2021. Networth is healthy at over Rs 652 crore and the Capital structure is moderate as reflected in gearing of 3.1 times as on March 31, 2021. Sustained improvement in the financial risk profile will remain a key monitorable. Leverage, though improved from FY19 levels, still remained slightly higher at 3.71 times (FY20: 3.59 times).
Susceptibility of operating profitability to volatility in the price of cotton :
The availability of cotton is highly dependent on the monsoon. Cotton production, government interventions, and fluctuations in global cotton output have resulted in sharp fluctuations in cotton prices in the past and impacted the operating margins of players. The operating margins of the company have been volatile between 6-12%, in the past four fiscals, ending FY21. Sustenance of the operating margin amid the volatility in cotton price will remain a key sensitivity factor.
Exposure to intense competition :
The cotton yarn industry has a large number of organised and unorganised players and is exposed to intense competition driven by the ease in availability of raw cotton and government-led subsidy over the past decades. The limited product diversification limits the bargaining power of yarn players with suppliers and customers restricting profitability.

ANALYTICAL APPROACH - Consolidated

For arriving at its ratings, BWR has considered the consolidated performance of SVP Global Ventures Ltd. BWR has applied its rating methodology as detailed in the Rating Criteria

RATING SENSITIVITIES

Positive:

Sustained improvement in revenues whilst sustaining profitability along with improvement in working capital management, leverage, and gearing resulting in an improved financial risk profile.

Negative:

Decline in revenues or profitability, or stretch in working capital requirements resulting in deterioration of financial risk profile especially liquidity

LIQUIDITY INDICATORS - Adequate

Liquidity is adequate, cash accruals are expected to be over Rs 135 crore against repayment obligations of Rs 92.2 crore in FY22. Unencumbered cash and bank balances were at over Rs 21.6 crore as on March 31, 2021. Bank limit utilisation is however highly utilized averaging 95% for the past 7 months through August 2021. Nonetheless, an additional infusion of funds through money to be received against share warrants issued to promoters and timely need-based fund support through unsecured loans from promoters further supports liquidity.

ABOUT THE ENTITY

SVPGVL, established in 1982, is a leading player in the value-added compact yarn business with state-of-the-art units and an aggregate manufacturing capacity of 4,00,000 spindles and 5900 rotors. It is listed on BSE and NSE. It is the holding company for the entire Shri Vallabh Pittie Group of Companies. SVP Global Ventures Ltd., being a holding company for all the Shri Vallabh Pittie Group of Companies as well as the presence of strong operational and management linkages, the company prepares its financials on a consolidated basis.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	95.79	79.70
EBITDA	Rs.Crs.	8.30	-6.14
PAT	Rs.Crs.	1.09	0.04
Tangible Net Worth	Rs.Crs.	91.74	32.75
Total Debt/Tangible Net Worth	Times	1.79	6.57
Current Ratio	Times	2.39	2.46

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

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	65.34	BWR BBB/Stable (Upgrade)	25Nov2020	BWR BBStable (Downgrade/ISSUER NOT COOPERATING*)	18Oct2019	BWR BBB-Stable (Reaffirmation)	NA	NA
NFB SubLimit	ST	(21.00)	BWR A3+ (Upgrade)	25Nov2020	BWR A4 (Downgrade/ISSUER NOT COOPERATING*)	18Oct2019	BWR A3 (Reaffirmation)	NA	NA
NFB SubLimit	ST	(2.50)	BWR A3+ (Upgrade)	NA	NA	NA	NA	NA	NA
Grand Total		65.34	(Rupees Sixty Five Crores and Thirty Four lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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 Criteria

Analytical Contacts
Arbez Noshir Karbhari Ratings Analyst arbez.k@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

SVP Global Ventures Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Indian Bank	Cash Credit - Sanctioned	25.00	_	25.00
	Sub-Limit (Bank Guarantee) - Sanctioned		(2.50)
	Sub-Limit (Letter of Credit) - Sanctioned		(21.00)
2	Rajasthan State Industrial Development and Investment Corporation Limited	Term Loan - Out-standing	40.34	_	40.34
Total			65.34	0.00	65.34
TOTAL (Rupees Sixty Five Crores and Thirty Four lakhs Only)

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Shrivallabh Pittie Enterprises Private Limited	99.99	Full	Subsidiary - Operational linkages and common management
Shrivallabh Pittie Industries Limited	99.9	Full	Step Down Subsidiary - Operational linkages and common management
Platinum Textiles Limited	99.99	Full	Step Down Subsidiary- Operational linkages and common management
SV Pittie Trading (FZC) LLC	99	Full	Step Down Subsidiary- Operational linkages and common management
SV Pittie Global Corporation	78.78	Full	Step Down Subsidiary- Operational linkages and common management
SVP Textiles PLC	90.38	Full	Step Down Subsidiary- Operational linkages and common management
SV Pittie Sohar Textiles (FZC) SAOC	55.75	Full	Subsidiary- Operational linkages and common management

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