Anubha Industries Pvt. Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 158.40 Crs. of Anubha Industries Pvt. Ltd. (AIPL or The Company)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (02 Dec 2020)	Present
Fund Based	151.86	154.85	Long Term	BWR BB-/Negative Downgrade/ISSUER NOT COOPERATING*	BWR BB /Stable Upgrade
Non Fund Based	3.55	3.55	Short Term	BWR A4 Reaffirmation/ISSUER NOT COOPERATING*	BWR A4 + Upgrade
Grand Total	155.41	158.40	(Rupees One Hundred Fifty Eight Crores and Forty 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 upgraded the ratings on the Bank Loan Facilities of AIPL to 'BWR BB/Stable/BWR A4+' from 'BWR BB-/Negative/ BWR A4; ISSUER NOT COOPERATING'.

The upgrade reflects an improvement in the company’s business risk profile, experienced promoters, sustained support demonstrated by the promoters, a diversified & growing customer base and moderate order book providing medium-term revenue visibility. These rating strengths are partially offset by the moderately weak financial risk profile, modest and fluctuating scale of operations, susceptibility of profitability to volatility in the price of cotton and intense competition inherent in the industry.

BWR has essentially relied upon the company's audited financial results up to FY21, provisional financials of 9MFY22, projections till FY24 as well as publicly available information and the information/clarifications provided by the company.

Outlook: Stable

BWR believes that AIPL’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:

Long track record of Promoters :
AIPL, the Surat-based Pratibha group company, is promoted by Mr. Aditya Goyal & Mr. Paresh Chaudhary, and is managed by experienced professionals on a day to day basis. The promoters have a vast experience of more than a decade in the textile processing business. The Pratibha group has multiple manufacturing units across diverse segments such as textile processing, manufacturing of disperse dyes, manufacturing of nylon yarn, weaving of linen fabrics and embroidery work etc. The group started its first venture in the year 1982 and has a long presence in the textile industry.
Sustained Support demonstrated by the Promoters: :

The rating gains strength from the fact that the promoters have been continuously supporting AIPL by cumulative infusion of around Rs 30.00 crores, in the forms of equity capital and unsecured loans (USL), in the last 21 months ending December ‘21. BWR also notes the corporate guarantee extended by Pratibha Endeavor Pvt Limited and Spectrum Dyes and Chemicals Pvt Ltd (flagship company) of Pratibha group for the chemical segment.
Improved Financial Profile :

Notwithstanding the volatility in the last few FYs, the overall financial profile has seen an improvement especially in H2FY22 period reflected in improved sales which stood at Rs.242.37 crore during 9MFY22 period, mainly on the back of more than doubling of monthly sales in December ‘21 and January ‘22 as compared to initial months of FY22. The operating margins in YTD FY22 are expected to substantially improve after an offbeat FY21 wherein AIPL had reported losses. However, the net profit margins, though improved substantially, continued to reflect losses in YTD FY22 performance.
Location advantage being present in the textile hub of Surat (Gujarat) :

AIPL operations are established in Surat, which is one of the major textile hubs in the country. This provides advantage to the company in terms of proximity to its major customers as well as raw material suppliers. AIPL earned 30-40% of revenue from the local market over the past three years ended FY21 and the trend continued in YTD FY22. The customer profile of AIPL is diversified, marked by ~24% of sales being contributed by the top five customers in FY21

Credit Risks:

Modest and fluctuating scale of operations with net losses :
During FY21, the TOI halved to Rs.156.27 crore on a y-o-y basis, which was largely on account of closure of operations in first half along with muted demand in the textile industry owing to spread of covid-19 pandemic. Moreover, during 9MFY22, AIPL recovery was relatively quicker and by September 2021 and October 2021 the monthly sales improved to pre-covid levels.
Weak, but improving, financial risk profile :
The Company had a total debt of Rs.194.80 crore as on March 31, 2021 comprising working capital cash credit facility of Rs. 76.87 crore and balance in the form of term loans and USL. Average utilization of working capital was high at around 95% during the past 10 months ended January 2022. Operating cash flows of the company were weak in FY21 followed by the weak demand with oversupply in denim industry and pandemic related weakness in demand, resulting in net loss of Rs.40.84 crore in FY21. This led to a material decline in debt coverage indicators and stood weak.
Working capital intensive nature of operations :
The operations of AIPL are working capital intensive in nature due to funds blocked in inventory in order to ensure adequate availability to timely meet the immediate demand by reducing the lead time as the entire manufacturing process takes up to two months. Moreover, out of total inventory as on March 31st 2021 (around 70% is finished inventory) due to slower momentum in the inventory. The debtors’ collection days elongated substantially to 164 days (FY20: 98 days), while the operating cycle stood at 203 days during FY21 (FY20:131 days).
Exposure to volatility in the prices of key raw material :

The major raw material requirement for the integrated denim manufacturing unit is cotton and yarn. The profitability depends largely on the prices of cotton and cotton yarn which are governed by various factors such as area under cultivation, monsoon, international demand-supply situation, etc. he market has seen volatility in cotton yarn production in the past due to unstable cotton prices and inconsistent cotton yarn export policy.
Presence in competitive and fragmented industry :
Owing to presence of large numbers of players operating in the industry and low degree of product differentiation the industry remained highly competitive and fragmented in nature limiting bargaining power of players of like AIPL. Moreover, the limited bargaining power with reputed customers puts additional pressure on the profit margins along with liberal credit policies adopted by the company. Further, the company also witnessed intense competition from other premium innerwear and sportswear manufacturers and hence ability to continuously increase its market presence and thereby increase the revenue position remains critical.

ANALYTICAL APPROACH - 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:-

Substantial and Sustained improvement in scale of operations and key financial metrics.

Negative:-

Any further material decline in revenue, deterioration in profit margins, capital structure, debt coverage indicators and indications of absence of sponsor support.

LIQUIDITY INDICATORS - Stretched

The company’s fund-based working capital limits remained 95% utilized over the 10 months ended January 2022.. Till December 2021, the promoters have infused more than 20 crore of fund in the form of capital & USL into AIPL and additionally availed BGECL of Rs.13.75 crore in January 2022 which has nil repayment for next two years. It will also provide some cushion to meet debt repayment of Rs.21.13 crore in FY23 and pending debt obligation of Rs.1.47 crore as on Feb 01, 2022 against expected NCA of Rs. 3.38 crore and Rs.18.31 crore in FY22 & FY23 respectively.

ABOUT THE ENTITY

Incorporated in 2012, AIPL is engaged in manufacturing of denim and cotton fabrics with an installed capacity of 20 million meters. AIPL is promoted by Surat- based “Pratibha group”. The Pratibha group is a four-decade old group having business interests in the field of textile and related business segments. The group has multiple manufacturing units across diverse businesses such as textile processing houses, manufacturing of disperse dyes, manufacturing of nylon yarn, weaving of linen fabrics and embroidery work, etc. The Company was set up in 2012 however its commercial production started from October 2014. Mr. Aditya Goyal and Mr. Paresh Chaudhary are the directors of the company.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	156.29	311.22
EBITDA	Rs.Crs.	-15.59	28.11
PAT	Rs.Crs.	-40.84	0.62
Tangible Net Worth	Rs.Crs.	59.56	97.84
Total Debt/Tangible Net Worth	Times	3.27	1.73
Current Ratio	Times	1.24	1.22

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	154.85	BWR BB/Stable (Upgrade)	NA	NA	02Dec2020	BWR BB-Negative (Downgrade/ISSUER NOT COOPERATING*)	14May2019	BWR BB+Stable (Downgrade/ISSUER NOT COOPERATING*)
Non Fund Based	ST	3.55	BWR A4+ (Upgrade)	NA	NA	02Dec2020	BWR A4 (Reaffirmation/ISSUER NOT COOPERATING*)	14May2019	BWR A4 (Downgrade/ISSUER NOT COOPERATING*)
Grand Total		158.40	(Rupees One Hundred Fifty Eight Crores and Forty 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
Roma Gupta Ratings Analyst roma.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Anubha Industries 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	Bank of Baroda	Term Loan - Sanctioned	33.60	_	33.60
2	Bank of Baroda	Cash Credit - Sanctioned	80.00	_	80.00
3	Bank of Baroda	Bank Guarantee - Sanctioned	_	3.55	3.55
4	Bank of Baroda	GECL - Sanctioned	13.75	_	13.75
5	Bank of Baroda	GECL - Sanctioned	27.50	_	27.50
Total			154.85	3.55	158.40
TOTAL (Rupees One Hundred Fifty Eight Crores and Forty lakhs Only)

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