Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 33.50 Crs. of Alpine Knits India Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (18 Dec 2020) |
Present | ||
| Fund Based | 18.50 | 18.50 | Long Term |
BWR BB- /Stable
Upgrade |
BWR BB -
/Stable Reaffirmation |
| Non Fund Based | 15.00 | 15.00 | Short Term |
BWR A4
Reaffirmation |
BWR A4
Reaffirmation |
| Grand Total | 33.50 | 33.50 | (Rupees Thirty Three Crores and Fifty lakhs Only) | ||
The ratings continue to draw strength from the experience of the directors, long standing relationships with reputed clientele. However, the ratings remain constrained by working capital intensive operations, low debt coverage metrics, and high gearing.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. Brickwork Ratings believes that AKIPL’s business and financial risk profile will be maintained over the medium term. The outlook may be revised to positive if there is improvement in debt protection metrics, net worth and profitability on a sustained basis, leading to strengthening of financial risk profile. The outlook may be revised to negative if there is decline in revenue, profitability and deterioration of gearing and debt coverage metrics, thereby weakening the financial risk profile of the Company.
KEY RATING DRIVERSCredit Strengths:
The company is located in Tirupur cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.
The promoters of the company Mr. Vikramaraj, Mr. R R Shrinivasan ,Mr. Raja M. Shanmugam and Mr. Ramaswamy have more than a decade experience in the textile industry. The company has operational existence since 2004.
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability
The company has stretched capital structure as indicated by total debt to tangible net worth of 4.34x times due to low net worth and high external borrowings. DSCR and ISCR of the company, despite its improvement, stands at 1.33x and 0.86x respectively in FY21 indicating company’s stressed position to meet its debt obligations. The current ratio of the company deteriorated to 0.79x in FY21 against 1.06x in FY20.
The company has thin net profit margins as indicated by 0.74% as on FY21.The company is also exposed to forex rate fluctuations however, availment of forward contracts has reduced the exposure to certain extent.
For arriving at its ratings, Brickwork Ratings (BWR) has considered the audited financials of FY19, FY20, and, FY21, and projected financials of FY22 and FY23 and information/clarifications provided by the company’s management. BWR has applied its rating methodology as described in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to increase its revenues, profitability margin and improve their net worth would be the key rating sensitivities.
Positive: The rating outlook may be revised to positive if the company shows sustained improvement in revenue and profit margins, improvement in net worth and debt protection metrics.
Negative: The rating may be downgraded if there is a deterioration of liquidity profile or gearing ratios.
Liquidity is marked by moderate net cash accruals of Rs 2.22 Crs viz a viz repayment obligations i.e. CPLTD of Rs 0.05 Crs in FY21, decreased utilized bank limits of ~ 73~74% on an average and modest cash balance Rs.6.84 Crs in FY21. The days receivable are within 90 days and have improved from 69 days in FY20 to 53 days in FY21. ISCR is stretched at 0.86x in FY21. However, the company has modest debt protection metrics i.e DSCR at 1.33x, and current ratio is stretched at 0.79x and high gearing ratio of 4.34x in FY21 indicating liquidity stress.
ABOUT THE ENTITYM/s Alpine Knits India Pvt Ltd was established in 2002. The company is promoted by Mr.Vikramaraj, Mr. R R Shrinivasan, Mr. Raja M. Shanmugam and Mr.Ramaswamy. The company is primarily involved in doing agency business for a host of sewing machinery brands from Singapore, Japan and other countries, whose oblique super stockists are located in Chennai, Bangalore and Hyderabad. The company is involved in wholesale trading of various imported sewing machines. The company also operates a spinning mill which started in 2007. The company’s manufacturing unit is located in Palladam taluk, Tiruppur. The spinning mill operates three shifts per day having 25000 spindles in FY21 which is utilized at 100%.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 130.83 | 105.03 |
| EBITDA | Rs.Crs. | 4.93 | 2.93 |
| PAT | Rs.Crs. | 0.97 | 0.61 |
| Tangible Net Worth | Rs.Crs. | 7.57 | 4.64 |
| Total Debt/Tangible Net Worth | Times | 4.34 | 8.70 |
| Current Ratio | Times | 0.79 | 1.06 |
| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 18.50 |
BWR BB-/Stable
(Reaffirmation) |
NA |
NA
|
18Dec2020 |
BWR BB- Stable
(Upgrade) |
NA |
NA
|
| 0.00 |
NA
|
NA |
NA
|
25Sep2020 |
BWR B+ Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
||
| 0.00 |
NA
|
NA |
NA
|
21Jan2020 |
BWR B+ Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
||
| Non Fund Based | ST | 15.00 |
BWR A4
(Reaffirmation) |
NA |
NA
|
18Dec2020 |
BWR A4
(Reaffirmation) |
NA |
NA
|
| 0.00 |
NA
|
NA |
NA
|
25Sep2020 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
||
| 0.00 |
NA
|
NA |
NA
|
21Jan2020 |
BWR A4
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
||
| Grand Total | 33.50 | (Rupees Thirty Three Crores and Fifty 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 Criteria| Analytical Contacts | |
|---|---|
|
S. Adithya Ratings Analyst adithya.s@brickworkratings.com |
Varadarajan R Associate Director - Ratings Board : +91 044 24663326 varadarajan.r@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 | Canara Bank | Cash CreditSanctioned | 12.50 | _ | 12.50 | |
| 2 | Canara Bank | Cash CreditSanctioned | 6.00 | _ | 6.00 | |
| 3 | Canara Bank | Inland Letter of Credit (ILC)Sanctioned | _ | 15.00 | 15.00 | |
| Total | 18.50 | 15.00 | 33.50 | |||
| TOTAL (Rupees Thirty Three Crores and Fifty lakhs Only) | ||||||
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