BSL Ltd.

Brickwork Ratings reaffirms the ratings with change in outlook from Negative to Stable for the Bank Loan Facilities of Rs. 217.28 Crs. of BSL Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (27 Oct 2020)	Present
Fund Based	84.54	90.38	Long Term	BWR BBB+/Negative Reaffirmation and change in Outlook	BWR BBB + /Stable Reaffirmation and change in Outlook
Fund Based	91.77	89.50	Short Term	BWR A2 Reaffirmation	BWR A2 Reaffirmation
Non Fund Based	47.40	37.40	Short Term	BWR A2 Reaffirmation	BWR A2 Reaffirmation
Grand Total	223.71	217.28	(Rupees Two Hundred Seventeen Crores and Twenty Eight 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

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has reaffirmed the long-term rating at BWR BBB+ with a change in the outlook from Negative to Stable and the short-term rating was reaffirmed at BWR A2 for the bank loan facilities of BSL Limited (BSL or the company). The Outlook has been revised to Stable from Negative on account of improving performance over the last few quarters, viz. the average EBITDA and PAT margin is 10.35% and 3.24% simultaneously for the last 3 quarters. The company registered revenue of approximately Rs 202.80 Crs in H1FY22,

The rating reaffirmation continues to factor in the extensive experience of the management, established position of the company as an integrated textile player in India on account of being part of LNJ Bhilwara group, established brand in domestic and exports market, reasonable scale of operations and order book position, besides reasonable debt protection metrics. However, the ratings are constrained by thin profit margins, high gearing, foreign exchange and raw material price fluctuations risk.

KEY RATING DRIVERS

Credit Strengths:

Experienced management and group strength :
BSL Limited has well experienced directors and independent directors, having long experience in the textile industry. Shri Arun Churiwal (Chairman & Managing Director) and Shri Nivedan Churiwal (Joint Managing Director) have more than three and two decades of experience respectively in the textile sector. BSL is part of the LNJ Bhilwara group providing the much needed synergy and support from the common promoters of the group.
Scale of operations and good order book position :
Total operating income (TOI) of the BSL has declined from Rs 390.04 Crs in FY20 to Rs 321.42 Crs in FY21 due to impact of Covid-19 in the 1st quarter of FY21 but scale of operations are still reasonable considering H1FY22 revenue at Rs 202.80 Crs, and revival in both domestic and export demand of yarn and fabrics The company has an order book position of Rs.175 Crs as on 23 Nov 2021.
Debt protection metrics :
BSL’s ISCR (interest service coverage ratio) ratio is decent at 1.72x in FY21 (1.58x in FY20) and DSCR (debt service coverage ratio) is at 1.31x in FY21 (0.99x in FY20).
Established brand position in the market :
BSL markets its products under the brands BSL Suitings, Linfab, Belfast and Geoffrey Hammonds. Their brand is well accepted both in domestic and international markets.

Credit Risks:

Thin Profit margins :
BSL has low net profit margins of 0.42% in FY21 against 0.43% in FY20. Operating profit margin of the company has marginally improved to 8.99% in FY20 (7.47% in FY20). However there is improvement in operating margin to 10.14% and net margins to 3.16% in H1FY22, due to improvement in realizations.
Working capital intensive operations :
Operating cycle of the company has stretched from 132 days in FY20 to 157 days owing to an elongated inventory period from 147 days in FY20 to 179 days in FY21, largely due to Covid-19 impact.
High gearing :
The company has high gearing (debt/net worth), although it has improved marginally from 2.17x in FY20 to 2.07x in FY21. Gearing is high owing to the extensive working capital nature of business resulting in high total outstanding liabilities as compared to the tangible net worth of the company. The gearing is expected to remain high in the medium term.
Foreign exchange fluctuations risk :
Exports continue to be a major contributor to the total income accounting for approximately 57.98 % of the sales in FY21, which exposes the company to foreign exchange fluctuation risk. The company mitigates the risk through back-to-back forward contracts and its unhedged net forex exposure on 31 March 2021 was approximately Rs 5.96 Crs.
Raw Material Fluctuation Risk :
Raw material prices of polyester, viscose, polyester viscose blended yarn, silk and wool are susceptible to price fluctuation risk owing to uncertainty of supply-demand in the market. The price of the raw material is also linked to the other factors beyond management’s control like agro climatic, political, government interference, pandemic situation etc. However, the company sources most of the raw material from reputed suppliers RSWM Ltd. (group company), Grasim Industries and Reliance Industries Ltd which some way offset the risk. Further fierce competition from peers in the textile industry and substitutes in the market could adversely affect the profit margins in future.

ANALYTICAL APPROACH - Standalone

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 outlook may be revised to positive or the rating may be upgraded if there is significant improvement in the scale of operations and financial risk profile of the company.
Downward : BWR may revise the ratings downwards if the company achieves notably lower revenue than expected and deterioration in debt protection metrics and liquidity.

LIQUIDITY INDICATORS - Adequate

The company had cash accruals (profit after tax + depreciation) of Rs 13.53 Crs against current portion of long term debt (CPLTD) of Rs 6.30 Crs in FY21 and the expected cash flows are above Rs 14 Crs against CPLTD of Rs 11.70 Crs for FY22 and debt service coverage ratio(DSCR) is expected to be expected to be above 1.05x for FY22. The working capital utilization is around 80%-90% provides further cushion to the liquidity of the company.

ABOUT THE ENTITY

Incorporated in 1970 at Bhilwara, Rajasthan, BSL Ltd. is engaged in manufacturing a wide range of yarns and fabrics including woollen/worsted yarn, synthetics yarn, blended viscose fabrics,silk fabrics, furnishing and fashion fabrics. The company exports to around 54 countries located primarily in North and South America, Europe, Middle East and the Far East.BSL Ltd. is listed on BSE and NSE.

The Company has currently two wind power plants of 2.4 MW (for outside sales) and 2 MW capacity (for captive use) located in Village Gorera, Jaisalmer and Village Ola, Jaisalmer respectively and generation of wind power contributes around 0.28% of total revenue It has also already installed a 4.17 MW rooftop solar plant at its existing site under OPEX Model. BSL Ltd. is promoted by Mr. L N Jhunjhunwala, Chairman of LNJ Bhilwara group and is managed by Mr. A K Churiwal (Chairman and Managing director). Shri Nivedan Churiwal is the Joint Managing Director, Shri Ravi Jhunjhunwala and Shri Shekhar Agarwal are the other directors. Shri Sushil Jhunjhunwala, Shri A.N. Choudhary, Shri G P Singhal and Smt. Abhilasha Mimani are the independent directors.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	321.42	390.04
EBITDA	Rs.Crs.	28.91	29.12
PAT	Rs.Crs.	1.36	1.66
Tangible Net Worth	Rs.Crs.	78.13	74.84
Total Debt/Tangible Net Worth	Times	2.07	2.17
Current Ratio	Times	1.22	1.07

KEY COVENANTS OF THE FACILITY RATED

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

ANY OTHER INFORMATION

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	90.38	BWR BBB+/Stable (Reaffirmation and change in Outlook)	27Oct2020	BWR BBB+Negative (Reaffirmation and change in Outlook)	11Sep2019	BWR BBB+ Stable (Reaffirmation)	14Sep2018	BWR BBB+Stable (Reaffirmation)
Fund Based	ST	89.50	BWR A2 (Reaffirmation)	27Oct2020	BWR A2 (Reaffirmation)	11Sep2019	BWR A2 (Reaffirmation)	14Sep2018	BWR A2 (Reaffirmation)
Non Fund Based	ST	37.40	BWR A2 (Reaffirmation)	27Oct2020	BWR A2 (Reaffirmation)	11Sep2019	BWR A2 (Reaffirmation)	14Sep2018	BWR A2 (Reaffirmation)
Grand Total		217.28	(Rupees Two Hundred Seventeen Crores and Twenty Eight 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
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

BSL Ltd.

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	Export Import Bank of India	Term Loan - Sanctioned	4.80	_	4.80
2	IDBI Bank	Cash Credit - Sanctioned	3.50	_	3.50
3	IDBI Bank	Forward Contract - Sanctioned	_	3.00	3.00
4	IDBI Bank	Funded Interest Term Loan - Sanctioned	_	_	0.00
5	IDBI Bank	GECL - Sanctioned	5.10	_	5.10
6	IDBI Bank	ILC/FLC/BG - Sanctioned	_	13.00	13.00
7	IDBI Bank	PC/PCFC - Sanctioned	_	23.50	23.50
8	Punjab National Bank	PC/PCFC - Sanctioned	_	27.00	27.00
9	Punjab National Bank	ILC/FLC/BG - Sanctioned	_	12.00	12.00
10	Punjab National Bank	GECL - Sanctioned	10.02	_	10.02
11	Punjab National Bank	Funded Interest Term Loan - Sanctioned	_	_	0.00
12	Punjab National Bank	Forward Contract - Sanctioned	_	2.50	2.50
13	Punjab National Bank	Cash Credit - Sanctioned	22.00	_	22.00
14	Punjab National Bank	Common Covid Emergency Line of Credit (CCECL)	_	_	0.00
15	State Bank Of India (SBI)	Forward Contract - Sanctioned	_	1.90	1.90
16	State Bank Of India (SBI)	Cash Credit - Sanctioned	20.00	_	20.00
17	State Bank Of India (SBI)	Funded Interest Term Loan - Sanctioned	_	_	0.00
18	State Bank Of India (SBI)	GECL - Sanctioned	14.38	_	14.38
19	State Bank Of India (SBI)	Term Loan - Sanctioned	10.58	_	10.58
20	State Bank Of India (SBI)	ILC/FLC/BG - Sanctioned	_	5.00	5.00
21	State Bank Of India (SBI)	PC/PCFC - Sanctioned	_	39.00	39.00
22	State Bank Of India (SBI)	Common Covid Emergency Line of Credit (CCECL)	_	_	0.00
Total			90.38	126.90	217.28
TOTAL (Rupees Two Hundred Seventeen Crores and Twenty Eight lakhs Only)

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