RATING RATIONALE
16 Aug 2022
Amit Leather Wears
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.00 Crs. of Amit Leather Wears
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Packing Credit in Foreign Currency (PCFC) | 07.00 | Short Term | BWR A4 |
| Sub Total | 07.00 | ||
| Grand Total | 07.00 | (Rupees Seven Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK :
BWR assigns the short term ratings of BWR A4. BWR believes that Amit Leather Wears 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
BWR has essentially relied upon the audited financial statements of Amit Leather Wears of FY20,FY21, Provisional financial of FY22 and projected financial statements of FY23, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the proprietor, established track of operations and above average financial risk profile. However, the rating is constrained by the scale of operations, constitution of the entity and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities
Credit Strengths:
- Locational Advantage :
The company is located in Delhi 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.
- Extensive experience of the proprietor :
The two-decade-long experience of the proprietor and his healthy relationships with suppliers and customers should continue to support the business. Despite intense competition from China, Brazil and Vietnam, the firm has maintained a strong clientele in the overseas markets.
Credit Risks:
- Competition in the Industry :
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
- Withdrawal Of capital :
withdrawal of capital by the proprietor for any personal contingency would adversely affect the capital structure of the firm.
- Weak Financials :
DSCR, ISCR, Debt Equity, TOL/TNW and Current Ratio, all these ratios are below the benchmark.
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 firm to improve its scale of operations and profitability as envisaged, ensure timely execution of projects, increase in its ongoing projects, ensure timely sales and realization of collections, efficiently manage its working capital requirements and strengthen its overall credit profile would be the key rating sensitivities.
Positives:
If improvement in Turnover/profitability and other financial parameters like Debt Equity, TOL/TNW, ISCR & DSCR.
Negatives:
Decline in revenue or profitability thereby impacting cash accruals.
Deterioration in financial risk profile on account of stretch in working capital cycle or any large, debt-funded capital expenditure.
1.Cash and Bank Balance increased from Rs. 0.04 Crs. in FY21 (Audited) to Rs. 0.06 Crs. in FY22 (Provisionals). It is projected to be Rs. 0.28 Crs. in FY23.
2.The Current Ratio of the company is 1.20x in FY21 (Audited) and 0.90x in FY22 (Provisionals).It is projected to be 1.01X in FY23.
3. Net Cash Accruals is Rs. 0.87 Crs. in FY21 (Audited) against which CPLTD is Nil. Net Cash Accruals is Rs. 0.87 Crs. in FY22 (Provisionals) against which CPLTD is Nil. Net Cash Accruals estimates to increase to Rs. 2.04 Crs in FY23 (Projected) against which CPLTD is Nil.
4. Gearing Ratio (Total Debt/TNW) has come down from 8.25X in FY21 (Audited) to 4.54X in FY22 (Provisionals). It is estimated to be 2.20X in FY23.
5. DSCR has decreased from 1.38X in FY21(Audited) to 0.81X in FY22 (Provisionals) . It is estimated to be 0.95X in FY23 on the basis of projected Financials.
<>6. ISCR has decreased from 2X in FY21(Audited) to 1.07X in FY22 (Provisionals) . It is estimated to be 0.47X in FY23 on the basis of projected Financials.7. Utilisation Limit- 95.80%.
Hence, the liquidity of the company is stressed.
NDS of the company has received from Jan'22 to July'22.
PROFILEAmit Leather Wears in Karol Bagh, Established in 1989 as a proprietorship concern by Mr Dheeraj Rehan, ALW manufactures and exports leather garments and bags.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 45.67 | 61.81 |
| EBITDA | Rs.Crs. | 1.91 | 1.63 |
| PAT | Rs.Crs. | 0.69 | 0.83 |
| Tangible Net Worth | Rs.Crs. | 2.70 | 2.88 |
| Total Debt/Tangible Net Worth | Times | 8.25 | 4.61 |
| Current Ratio | Times | 1.20 | 0.88 |
.
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Packing Credit in Foreign Currency (PCFC) | Short Term | 07.00 | BWR A4 | NA | NA | NA | |||
| Total | 07.00 | (Rupees Seven Crores 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 : For More Information Contact:| Analytical Contacts | |
|---|---|
|
Ashish Kumar Lead Analyst ashish.k@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@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 | Punjab and Sind Bank | Packing Credit in Foreign Currency (PCFC) | _ | 7.00 | 7.00 |
| Total | 0.00 | 7.00 | 7.00 | ||
| TOTAL (Rupees Seven Crores Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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