Amrit Crafts Pvt Ltd

Brickwork Ratings reaffirms the ratings for the aggregate Bank Loan Facilities of Amrit Crafts Pvt Ltd. for a reduced amount of Rs. 30.55 Crs.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (16 Sep 2020)	Present
Fund Based	32.10	28.55	Long Term	BWR BB /Stable Upgrade	BWR BB /Stable Reaffirmation
Non Fund Based	2.00	2.00	Short Term	BWR A4 Reaffirmation	BWR A4 Reaffirmation
Grand Total	34.10	30.55	(Rupees Thirty Crores and Fifty Five 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 has relied upon the Audited financials of the company for FY 19, FY 20 and Provisional financials of FY 21 along with its projected financials for FY 22 and FY 23, information available in public domain, as well as feedback from the company and its bankers for arriving at the present rating.

Based on a review, Brickwork Ratings has reaffirmed the rating of the long term bank loan facilities of Amrit Crafts Pvt Ltd. for Rs.28.55 Crs (reduced from Rs.32.10 Crs) at BWR BB/Stable and the rating of their short term bank loan facilities for Rs.2.00 Crs at BWR A4 (aggregate rated amount reduced from Rs.34.10 Crs to Rs.30.55 Crs). The rating reaffirmation factors in the experienced management, comfortable financial risk profile, reputed clientele base of the company, possible forward integration with its parent company, strategic location of the manufacturing unit, as well as its adequate liquidity The rating is, however, constrained by the working capital intensive nature of business, susceptibility of margins to volatility in Cotton Prices and Inherent industry risks.

The 'Stable' outlook indicates a low likelihood of rating change over the medium term. BWR believes that the business risk profile of Amrit Crafts Pvt Ltd. will be maintained over this period. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures on a continuous basis.

KEY RATING DRIVERS

Credit Strengths:

Experienced Management :
AEPL is managed by its four Directors namely, Mr. Anil Buchasia, Mr. Sohm Buchasia, Mr. Shivam Buchasia & Mr. Krishna Kumar Ram who are professionally qualified and have close to three decades of experience in the textile industry - both in the domestic and in the international markets.
Comfortable Financial risk profile :
The comfortable financial profile of the company is marked by moderate scale operations, healthy profitability, moderate leverage and debt coverage indicators. The company’s revenues stood at Rs.39.97 Crs in FY21 (Provisional) compared to Rs.44.81 Crs in FY20. The networth of the company stood comfortable at Rs.15.26 Crs in FY 21 (Provisional) compared to Rs.14.14 Crs in FY 20. The EBITDA has remained comfortable at Rs.8.87 Crs in FY 21 (Provisional) compared to Rs.9.03 Crs in FY 20. The debt to equity ratio stood moderate at 2.40 times as on 31st March, 2021 compared to 2.20 times as on 31st March, 2020. The interest coverage ratio (ISCR) and debt service coverage ratio (DSCR) of the company are also comfortable at 2.68 times and 1.45 times respectively in FY21 (Provisional).
Reputed Client base :
The customer profile of the company includes well known garment and hosiery companies like Lux Industries Ltd., Shivkripa Apparels Ltd., Daily Textile, Vintex Enterprises, Amrit Exports Pvt. Ltd. etc.
Possible forward integration with its parent :
Given the nature of its operations, ACPL has abundant scope to go in for forward integration with its parent company AEPL (which holds 81.13% stake in ACPL) through its dyeing and processing unit, and derive the benefits of group synergy, including access to overseas markets. In addition, the company has 7 acres of land, of which currently 70% is vacant, which gives additional advantage to the company for implementing future expansion plans. Although the plans for such expansions have been put on hold due to the current situation, the company expects to revive such plans in future.
Strategic location :
The plant is located in Joypul, Bira near Barasat and close to Jessore Road which is a major highway, thus providing ease of transportation.

Credit Risks:

Stretched operating cycle :
The operations of the company are working capital intensive as they have to maintain a high level of inventory due to which the inventory holding period was at 155 days in FY21 (Provisional) and cash conversion cycle of 228 days. However, with conditions becoming normal, this is likely to reduce.
Highly competitive industry :
India being a major textile hub, there are numerous players in the market at all levels which makes it a highly fragmented one which can affect the profitability.
Susceptibility of margins to volatility in Cotton Prices :
Currently, the yarn realisations and stable cotton prices are favoring the spinners. However, most mid and small sized spinners are susceptible to adverse changes in the raw material prices due to their limited ability to completely pass on this increase to their customers. With the commoditized nature of operations, the ability of ACPL to maintain its operating margins at 14-15% for a longer period will determine the sustainability of its performance.
Inherent industry Risks :
The cotton yarn industry is characterised by cyclicality in earnings, overcapacity, intense competition and low bargaining power with suppliers and customers. The yarn industry is also sensitive to supply-side constraints as cotton is an agricultural commodity, and the overall yield of cotton is highly dependent on agro-climatic conditions in the country. Furthermore, the industry’s performance is largely dependent on government regulations such as fixing the MSP for cotton, imposing or lifting barriers for international trade and competition from other exporting countries.

ANALYTICAL APPROACH - Standalone

Standalone: 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

Positive

Increase in scale of operations and profits, Improvement in EBITDA margin and Net profit Margin on a consistent basis
Increase its Net Worth, improvement in the operating efficiency of the company.

Negative

Decline in Revenue & deterioration of the financial position of the company, including deterioration in liquidity, leverage and TNW on a continuous basis.
Delay in payments of its debt obligations

LIQUIDITY INDICATORS - Adequate

The liquidity of the company stands adequate as reflected by the comfortable cash credit utilisation ~at 83% for the last six months ended November 2021. The company did not have any major debt-led capex plans in FY21. The Company has comfortable EBITDA which stood at Rs.8.87 Crs in FY 21 (Provisional) and Rs.9.03 Crs in FY 20. Liquidity is further supported by a comfortable ISCR & DSCR of 2.68 times and 1.45 times respectively in FY 2021 (Provisional). The current ratio stood comfortable at 1.75 times in FY 21 (Provisional) (FY20:1.32 times) while cash and Bank Balances stood comfortable at Rs.1.06 Crs in FY 21 (Provisional). Net Cash accruals were Rs.5.44 against repayment obligations of Rs.3.46 Crs.

ABOUT THE ENTITY

Amrit Crafts Pvt Ltd (AEPL), is a Kolkata based private limited company incorporated in 2004 and commercial operations started in February 2018. The company is engaged in the sale of fabric as well as trading and manufacturing of garments in the domestic market. The total Production capacity of the company is 15,000 kg per day. ACPL is managed by four directors namely, Mr. Shom Buchasia, Mr. Shivam Buchasia, Mr. Anil Buchasia and Mr. Krishna Kumar Ram.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	44.81	29.50
EBITDA	Rs.Crs.	9.03	6.81
PAT	Rs.Crs.	1.52	-1.47
Tangible Net Worth	Rs.Crs.	14.14	12.61
Total Debt/Tangible Net Worth	Times	2.20	2.85
Current Ratio	Times	1.32	1.32

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	28.55	BWR BB/Stable (Reaffirmation)	16Sep2020	BWR BB Stable (Upgrade)	12Jul2019	BWR BB-Stable (Reaffirmation)	23Apr2018	BWR BB-Stable (Assignment)
Non Fund Based	ST	2.00	BWR A4 (Reaffirmation)	16Sep2020	BWR A4 (Reaffirmation)	12Jul2019	BWR A4 (Reaffirmation)	23Apr2018	BWR A4 (Assignment)
Grand Total		30.55	(Rupees Thirty Crores and Fifty Five 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.

Analytical Contacts
Saroj Kumar Das Ratings Analyst sarojkumar.d@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Amrit Crafts Pvt 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	Indian Bank	Term Loan - Sanctioned	16.55	_	16.55
2	Indian Bank	Cash Credit - Sanctioned	12.00	_	12.00
3	Indian Bank	Bank Guarantee - Sanctioned	_	1.00	1.00
4	Indian Bank	Letter of Credit - Sanctioned	_	1.00	1.00
Total			28.55	2.00	30.55
TOTAL (Rupees Thirty Crores and Fifty Five lakhs Only)

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