Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 87.97 Crs. of Globe Textiles (India) Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (19 Jul 2021) |
Present | ||
Fund Based | 79.78 | 80.35 | Long Term |
BWR BBB- /Stable
Reaffirmation |
BWR BBB
/Stable Upgrade |
(5.00) | (10.00) | ||||
(5.00) | (9.00) | ||||
Non Fund Based | 8.74 | 7.62 | Short Term |
BWR A3
Reaffirmation |
BWR A3 +
Upgrade |
(0.00) | (5.00) | ||||
Grand Total | 88.52 | 87.97 | (Rupees Eighty Seven Crores and Ninety Seven lakhs Only) |
BWR has considered the standalone financials of the Company and essentially relied upon the audited financial statements up to FY22, Projected financials up to FY23, 24 and publicly available information and clarifications provided by the entity’s management.
The rating upgrade draws strength from a significant improvement in operating income with stable profit margins in FY22 and moderate financial risk profile. The Company also benefits from the vast business experience of about two decades of the promoters in the line of the textile industry. The profit margins are exposed to susceptibility to volatility prevailed in textile market, forex fluctuation and intense competitive industry. Also, the business is working capital intensive, hence, the efficient management of liquidity remains a key rating sensitivity.
BWR believes that the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
Established in 2006, GTIL' operations are managed by Mr Bhavik Parikh and Mr Nilay Vora, who have more than a decade of experience in the textile business. The company benefits from longstanding existence in the industry and business supports healthy relationships with customers and suppliers. Over a period of time, the company has established market in domestic as well as internationally.
The company has reported, 48% rise in the total operating income to Rs. 383.42 Crs in FY22 against Rs.259.09 Crs in FY21 on the back of the rise in the demand of the denim in the domestic market . TOI comprises of export sales 23% in FY21 and 24% in FY22 to Saudi Arabic and European countries etc. Also, the company is able to operate at full capacities and sales realization is improved in the past fiscal. Profit margins shows significant improvement in the last two fiscals i.e OPM from 1.68% to 3.85% and NPM from 0.10% to 1.34%. Going forward, the longstanding relationship with customers and healthy capacity utilization levels will remain helpful for stable operations.
GTIL's financial risk profile is moderate reflected by healthy capital structure and absence of any major long term liabilities. Due retained profits of past years, the tangible net worth is Rs. 49.74 Crs in FY22. Debt /TNW is marginally deteriorated from 1.73x in FY21 to 1.82x in FY22 due to additional covid line of credits availed in FY22. Due to healthy profit margins, the debt protection metrics improved i.e debt service coverage from interest coverage 0.89x to 1.49x and 0.70x to 1.62x in FY21 and FY22 respectively.
The textile industry is highly fragmented and competitive with the presence of many organized and unorganized players. GTIL’s margins remain vulnerable to fluctuation in the key raw material prices, forex rates and demand of garments, bedsheets, denims, etc in the local and international market. Major raw materials used by BIPL include cotton/cotton yarn. Cotton prices are volatile in nature driven by various factors like, area under cultivation, yield for the year, government regulation and pricing, etc. Hence profitability of the company is highly susceptible to raw material price fluctuation which has exhibited considerable volatility in the past. GTIL faces risk of volatilities in foreign exchange rates as the company derives around 24% of revenue from export orders.
The company's operations are characterized by the high working capital intensity business due to holding a large inventory between 2-3 months. Receivable days remained high at 129 and 108 days in the last two fiscals. As a result, the utilization of cash credit limit remains high, though availment of additional covid line of emergency imparts some comfort.
For arriving at its ratings, BWR has considered a standalone financials of the company and applied its rating methodology as detailed in the Rating Criteria:
RATING SENSITIVITIES
Positive: Substantial and sustained growth in operating income as per the projection, significant improvement in the profitability and better management of working capital cycle.
Negative: Deterioration in operating and net margin, significant rise in debt level, stretched working capital cycle driven by a pile-up of inventory or elongated receivables impacting the liquidity.
LIQUIDITY INDICATORS - Adequate
Net cash accruals shows increase from Rs. 2.06Crs in FY21 and Rs. 6.07 Crs in FY22, which is adequate against the current portion of long term debt. Average cash credit limit utilization remained moderate above 83.77% in the last 6 months ending on 30April2022. Current Ratio is comfortable at 1.19x as on 31st March, 2022. The company has availed total covid line of credit of Rs. 16.95 Crs m which provides the cushion in working capital limits. The operation is working capital intensive, hence efficient management will remain a key rating sensitivity in the near term.
ABOUT THE ENTITYIncorporated in 2006,Globe Textiles (India) Limited, is a NSE listed company promoted by Mr Bhavin Parikh and Mr Nilay Vora. GTIL is a manufacturer and exporter of readymade garments , bedsheets, denims etc. The company has a manufacturing unit- at Ahmedabad with manufacturing capacities of 9 Lakhs garments per annum and export unit at the Special Economic Zone(SEZ) .
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 21-22 (Audited) |
FY 20-21 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 383.42 | 259.09 |
EBITDA | Rs.Crs. | 14.75 | 4.35 |
PAT | Rs.Crs. | 5.14 | 0.25 |
Tangible Net Worth | Rs.Crs. | 49.74 | 42.76 |
Total Debt/Tangible Net Worth | Times | 1.82 | 1.73 |
Current Ratio | Times | 1.19 | 1.21 |
Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 80.35 |
BWR BBB/Stable
(Upgrade) |
19Jul2021 |
BWR BBB- Stable
(Reaffirmation) |
23Apr2020 |
BWR BBB- Stable
(Reaffirmation) |
19Feb2019 |
BWR BBB- Stable
(Assignment) |
FB SubLimit | LT | (10.00) |
BWR BBB/Stable
(Upgrade) |
19Jul2021 |
BWR BBB- Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
(9.00) |
BWR BBB/Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Non Fund Based | ST | 7.62 |
BWR A3+
(Upgrade) |
19Jul2021 |
BWR A3
(Reaffirmation) |
23Apr2020 |
BWR A3
(Reaffirmation) |
19Feb2019 |
BWR A3
(Assignment) |
NFB SubLimit | ST | (5.00) |
BWR A3+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 87.97 | (Rupees Eighty Seven Crores and Ninety Seven 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 CriteriaAnalytical Contacts | |
---|---|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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 | Bank of Maharashtra | Cash CreditSanctioned | 42.00 | _ | 42.00 | |
Sub-Limit (Letter of Credit) Sanctioned | (5.00) | |||||
2 | Bank of Maharashtra | Credit Exposure Limit (CEL)Sanctioned | _ | 1.87 | 1.87 | |
3 | Karur Vysya Bank | Covid -19 Emergency Line CreditSanctioned | 6.65 | _ | 6.65 | |
4 | Karur Vysya Bank | Credit Exposure Limit (CEL)Sanctioned | _ | 0.75 | 0.75 | |
5 | Karur Vysya Bank | Term LoanOut-standing | _ | _ | 0.00 | |
6 | Karur Vysya Bank | Cash CreditSanctioned | 10.00 | _ | 10.00 | |
Sub-Limit (OCC) Sanctioned | (9.00) | |||||
Sub-Limit (PCL/PCFC/FBN/P/EBD) Sanctioned | (10.00) | |||||
7 | Union Bank of India | Cash CreditSanctioned | 18.00 | _ | 18.00 | |
8 | Union Bank of India | ILC/FLC/BGSanctioned | _ | 5.00 | 5.00 | |
9 | Union Bank of India | Covid -19 Emergency Line CreditSanctioned | 3.70 | _ | 3.70 | |
Total | 80.35 | 7.62 | 87.97 | |||
TOTAL (Rupees Eighty Seven Crores and Ninety Seven lakhs Only) |
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