Sai Creations

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.4.81 Crs. of Sai Creations

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Term Loan - Sanctioned	00.10 00.31	Long Term	BWR B + (Stable)
Packing Credit (PC) - Sanctioned	04.40	Short Term	BWR A4
Sub Total	04.81
Grand Total	04.81	(Rupees Four Crores and Eighty One lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

Brickwork rating has assigned the long term rating BWR B+ and short term ratings BWR A4 to Sai Creations with a Stable Outlook on account of vast experience of the partners in the same field of manufacturing and export of Ready-made Garments for more than a decade. The rating is further supported by location based advantage, moderate gearing, above average debt protection metrics and moderate profitability.

The rating, however, is constrained by moderate scale of operations, risk associated with partnership concerns, stretched liquidity, vulnerability of profits to the movement of currency exchange rates, intense competition and fragmented nature of the industry.

KEY RATING DRIVERS

Credit Strengths:

• Experience of the Partners :

  Sai Creations was registered as Partnership Concern in 2006 and commenced its business in the same year itself. The firm is in existence for 13 years and has seen complete business cycles. Mr. Raj Kumar and Mrs. Anita Rani are the partners in the firm. They are in the same line of business for more than a decade which has enabled them to establish relations with customers & suppliers and to understand the intricacies of the business.

• Moderate Financial Risk Profile :

  Firm's debt profile mainly consists of working capital borrowings. Its capital structure improved in FY19 with Gearing of 1.70X which has declined from 2.47X in FY18 owing to ploughing of profits which has further led to increase in TNW to Rs.2.87 Cr. in FY19 from Rs.1.83 Cr. in FY18. Debt Protection Metrics i.e. DSCR and ISCR at 3.44X and 3.80X in FY19 have improved from 2.46X and 2.85X respectively in FY18 due to improvement in scale of operations. Profit Margins are considered strong i.e. Net Profit Margins and Operating Profit Margins have improved from 2.32% and 4.90% in FY18 to 3.68% and 5.93% in FY19 respectively.

• Location based advantage :

  The firm is located in Noida cluster and thus has a competitive advantage in terms of skilled labor and vendors making the firm more efficient and cost effective.

Credit Risks:

• Moderate Scale of Operations :

  The firm reported a revenue of Rs.23.59 Cr. in FY18. According to the management certified provisional financials, the company has achieved net sales of Rs.31.04 Cr. in FY19 registering growth of 31.58% in FY19. The management has also informed that the company has clocked a revenue of Rs.18.50 Cr. till August, 2019.

• Constitution of the firm being a partnership concern :

  The firm being a partnership concern, it is exposed to inherent risk of the capital being withdrawn at the time of personal contingency which will affect its capital structure.

• Stretched Liquidity :

  Liquidity is considered stretched marked by low Current Ratio, which is at 1.08X and 1.10X in FY18 and FY19 respectively. Other liquidity indicators stood moderate marked by comfortable conversion cycle of 38 and 61 days in FY18 and FY19 respectively.

• Intense Competition and fragmented nature of the industry :

  The textile industry is dominated by numerous independent, small-scale enterprises. High degree of fragmentation due to the presence of large number of unorganized players has led to high competitive intensity in the processing segment.

• Vulnerability of profits to movement of currency exchange rates :

  The profitability of the firm is largely exposed to fluctuations in exchange rates. There is no hedging mechanism adopted by the firm.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For ariving 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

Going forward, the company's ability to increase the scale of the business and manage its working capital efficiently would be key sensitivities over short to medium term. 

Positive: The rating outlook may be revised to positive if the company is able to substantially improve the topline.

Negative: The rating may be downgraded if there is a deterioration of profitability and liquidity profile of the firm.

LIQUIDITY POSITION

Liquidity is stretched marked by low Current Ratio at 1.08X and 1.10X in FY18 and FY19 respectively. Other liquidity indicators stood moderate marked by comfortable conversion cycle of 38 and 61 days in FY18 and FY19 respectively. Debt Protection Metrics i.e. DSCR and ISCR at 3.44X and 3.80X in FY19 have improved from 2.46X and 2.85X respectively in FY18  due to improvement in scale of operations. There has been more than 85% utilization of Packing Credit Limit.  

PROFILE

Sai Creations was registered as Partnership Concern in 2006 and commenced its business in the same year itself. The firm is in manufacturing and export of ready-made garments. Raw materials for the firm include Fabrics, Denims, Elastics, Buttons etc. which are majorly procured from the local market. The firm is in 100% exports. Ready made garments include Ladies and gents wear, kids wear and handicrafts. Handicrafts constitute only 10-15% of the total exports. 

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs.	23.59	13.27
EBITDA	Rs.Crs.	1.16	0.83
PAT	Rs.Crs.	0.55	0.38
Tangible Net Worth	Rs.Crs.	1.83	2.04
Total Debt/Tangible Net Worth	Times	2.47	1.69
Current Ratio	Times	1.08	1.19

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
Fund Based
1	Cash Credit - Sanctioned Term Loan - Sanctioned	Long Term	0.10 0.31	BWR B+ (Pronounced as BWR Single B plus) (Outlook: Stable)	NA	NA	NA
2	Packing Credit (PC) - Sanctioned	Short Term	4.40	BWR A4 (Pronounced as BWR A Four )	NA	NA	NA
Total			04.81	(Rupees Four Crores and Eighty One lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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.

For More Information Contact:

Analytical Contacts	Investor Contacts
Aayush Verma Ratings Analyst B : +91 11 2341 2232 aayush.v@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Packing Credit (PC) - Sanctioned	_	4.40	4.40
2	Cash Credit - Sanctioned	0.10	_	0.10
3	Term Loan - Sanctioned	0.31	_	0.31
Total				4.81
TOTAL (Rupees Four Crores and Eighty One lakhs Only)