Synergy Lifestyles Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.19.70 Crs. of Synergy Lifestyles Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Over Draft - Sanctioned Term Loan - Sanctioned	01.00 01.20	Long Term	BWR BB (Stable)
Packing Credit (PC) - Sanctioned	17.50	Short Term	BWR A4 +
Sub Total	19.70
Grand Total	19.70	(Rupees Nineteen Crores and Seventy 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

BWR believes that Synergy Lifestyles Pvt. Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. 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.

KEY RATING DRIVERS

Credit Strengths:

• Management Experience :

  The main promoter of the company Mrs Sunita Namjoshi possesses an industry experience of more than three decades and is well-conversant with the market dynamics. The top management is ably supported by the qualified and experienced personnels. With the long-standing presence in the industry the management has established long term relationships with the customers and suppliers to support the business.

• Diversified Product Portfolio and reputed Client Base :

  The company caters majorly to the international market and supplies to a reputed retail and wholesale client base across US, Europe, Australia and many other destinations across the world. The product portfolio of the company is diversified, including Decorative pillows, table linen, kitchen linen, curtains, bed linen, and accessories. The company works with a number of fabrics like Woven and printed cotton, silk, linen, felt, synthetic blends, leather and plastic wire and has its own design team. Some of the client of the company includes West Elm, Walton, Danica and Merision.

• Increasing Scale of Operations and Profitability :

  The company has registered a growth of around 30% in the revenue during FY19 over FY18. The total revenue stood at Rs. 53.19 cr v/s Rs 40.83 crs for FY18. The company has further clocked in the revenue of Rs. 52.14crs during FY20 (Prov). The revenue growth was moderated marginally mainly on account of slowdown in overall business due to Covid-19 and subsequent lockdown in the last 15-20 days. The profit margins, viz OPM and NPM in the company have remained adequate in the range of ~ 8 to 10% and ~ 3 to 4.00% respectively over the past two years, FY20.

• Moderate Debt Coverage Indicators: :

  Due to the healthy profitability in the company, the DSCR and ISCR stood moderate, indicating the adequacy of the company to service the debt obligations. The DSCR and ISCR stood at 2.48x and 4.11x in FY20 (Prov) and 2.61x and 4.89x during FY19 (A). It is estimated to stay in the same line in the absence of any major debt funded capex.

Credit Risks:

• Leveraged Capital Structure :

  The Tangible Net Worth in the company stood modest at Rs.6.07crs as on March 20 (Prov) as against Rs. 4.39crs as on March FY19. However, considering the Unsecured Loans by the directors, the analysed net worth stood at Rs. 10.70crs in FY20 and Rs. 9.02crs in FY19. Due the modest net worth level, the overall gearing of the company stood high at 2.93 x in FY20 against 3.76x in FY19. The TOL/TNW stood at 3.39x in FY20 and 4.10x FY19, which is high and any debt funded capex undertaken by the company may affect it adversely.

• Intensely Competitive Industry & Forex Fluctuation Risk :

  The company faces stiff competition from other manufacturers with limited pricing flexibility and bargaining power. Further, the majority of revenue comes from the international market, any sharp fluctuation in forex rates affects realizations and thereby cash accruals. This exposes the operating margin to fluctuations in forex rates.

• Customer Concentration Risk: :

  The top five customers in the company constitute around 90% sales of the company. However, they are the regular customers and the company has established long standing relationships with them. To mitigate the risk of the customer concentration, the company’s marketing team is actively pitching the new client to expand its clientele base.

• Liquidity :

  The liquidity is stretched marked by a low current ratio of 1.01x and 0.90x during FY20 (Prov) and FY19 respectively.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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

Going forward, the ability of the Company to accelerate its scale of operations, increase its profit margins, achieve its financial projections, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profiles hall be the key rating sensitivities.

Positive: The rating may be upgraded if there is a significant improvement in the revenue of the company, projections are achieved and the profitability improves.

Negative: The rating may be downgraded in case there is a significant deterioration in the revenue, profitability, and the liquidity of the company, slowdowns in the industry, directly impacting the company’s performance.

LIQUIDITY POSITION

Stretched:

The liquidity position of the company is stretched marked by a low current ratio of 1.01x as of March 2020 and 0.90x as of March 2019. The cash and cash equivalents of the company stood at Rs 2.45crs as of March 2020 and the company does not have any liquid investments. The net cash accruals of the company are sufficient to discharge the matured term obligations.

PROFILE

Synergy Lifestyles Private Limited was initially incorporated as a Partnership Firm in 1991 to provide innovative fabrics & home furnishing for domestic as well as international markets. The business of M/s Synergy was taken over by Synergy Lifestyles Pvt Ltd in January 2001. The company has its corporate office with a showroom in Mumbai, a showroom in Noida, and two production centres in Karur and Bangalore. The company is an ISO 9001 2000 certified company for quality management systems. The product profile of the company includes the manufacturing of Decorative pillows, table linen, kitchen linen, curtains, throws, bed linen, and accessories. The company has its own designing team with a data processing unit. The company caters to some of the biggest retail and wholesale clients across the USA, Europe, Australia, and many other destinations across the world. The founder and chairperson Mrs. Sunita Namjoshi have a rich experience of over three decades in the industry.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	53.19	40.83
EBITDA	Rs.Crs.	5.29	-1.43
PAT	Rs.Crs.	2.11	-1.97
Tangible Net Worth	Rs.Crs.	4.39	2.28
Total Debt/Tangible Net Worth	Times	3.76	7.60
Current Ratio	Times	0.90	0.75

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Over Draft - Sanctioned Term Loan - Sanctioned	Long Term	01.00 01.20	BWR BB (Stable)	NA	NA	NA
2	Packing Credit (PC) - Sanctioned	Short Term	17.50	BWR A4+	NA	NA	NA
Total			19.70	(Rupees Nineteen Crores and Seventy 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.

Hyperlink/Reference to applicable Criteria :

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies

For More Information Contact:

Analytical Contacts	Investor Contacts
Srishti Kaushik Lead Analyst srishti.k@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Sushil Kumar Chitkara Associate Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Over Draft - Sanctioned	1.00	_	1.00
2	Term Loan - Sanctioned	1.20	_	1.20
3	Packing Credit (PC) - Sanctioned	_	17.50	17.50
Total				19.70
TOTAL (Rupees Nineteen Crores and Seventy lakhs Only)