Ginni Filaments Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 269.17 Crs. of Ginni Filaments Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (18 Sep 2020)	Present
Fund Based	223.50	207.00	Long Term	BWR BBB (Stable) #Upgrade	BWR BBB + /Stable Upgrade
Non Fund Based	57.60	62.17	Short Term	BWR A3+ #Upgrade	BWR A2 Upgrade
Grand Total	281.10	269.17	(Rupees Two Hundred Sixty Nine Crores and Seventeen lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork ratings has upgraded the long term rating of Ginni Filaments Limited (GFL) to BWR BBB+ from BWR BBB and short term rating to BWR A2 from BWR A3+ for the bank loan facilities of GFL. The rating upgrade is underpinned by GFL’s improving EBITDA margins which in turn are supported by favorable product mix. The upgrade is also driven by improved credit profile of GFL marked by strong cash accruals despite capex and healthy debt protection metrics. The ratings also factor in the long track record of operations and extensive industry experience of the promoters, comfortable gearing ratio and established long term relations with established players, integrated operations and diversified product mix. The rating is, however, constrained by exposure to risks relating to volatility in raw material prices, highly fragmented and competitive nature of industry and foreign exchange fluctuations.

The rating outlook is Stable supported by strong demand outlook, and sustainable improvement in margin profile mitigating overall industry risks

KEY RATING DRIVERS

Credit Strengths:

Established long term relationship with established players :
GFL has established long term relations with reputed clients including Shahi Exports Private Limited, Future Group (now Reliance Retail), Orient Craft Limited and Johnson & Johnson etc. The company has changed its business strategy as 80% of the business is now procured directly from customers which has reduced the commission paid to dealers and improved the margins of the company in FY21
Improvement Financial Risk Profile :
The overall profitability of the company has improved in FY 21 as EBITDA margin and net profit margin improved in FY 21 to 14.22% and 5.31% from 7.54% and 0.72% reported in FY 20 respectively. GFL generates 65% revenues from the textile business which has 4.41% margin due to high competition. However, the blended EBITDA margin stood at 10.27% in FY21 supported by higher margin non-woven and wipes business. With the increase in demand for wipes in recent times, the company has expanded the wipes production by 20% of existing capacity in FY 21 and further improving its capacity at a cost of Rs. 76 Crs in FY22 which will further improve the profitability and turnover. The company is also having a cash profit of Rs. 66.09 Crs in FY 21. The company has a reserves of Rs. 119 Crs in FY21 which can be utilsed for carrying out expansion plans. Company has a comfortable gearing ratio (total overall liability/ tangible net worth) stood at 1.25x in FY 21 improved from 1.80x as of FY20. Also, the company has comfortable debt protection metrics as interest service coverage ratio & debt service coverage ratio stood at 4.08x and 2.62x in FY 21 which has improved from 1.80x and 1.76x in FY20 respectively.
Integrated operations and diversified product mix :
During FY21, GFL derived around 42% (PY: 45%) of its TOI from yarn, around 28% (PY: 24%) from non-woven, around 11% (PY: 12%) from fabrics, around 15% (PY: 10%) of its TOI from wipes & other products and around 5% (PY: 8%) of its TOI from garments leading to a diversified product mix
Strong Demand Outlook :
The future for the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. With the opening up of retail, offices, educational institutions, social functions, the demand is expected to improve in H2FY22 after the second wave of covid. The export demand will remain favourable as countries are diversifying their imports away from China.

Credit Risks:

Exposure to risks relating to volatility in raw material prices :
Major raw material of the company is cotton. Cotton prices are in turn dependent on government policies, production, seasonal factors, prices of synthetic fiber and international and domestic demand and production. The raw material for wipes and non woven fabric is polyester.
Fragmented and competitive industry :
The spectrum of the textile industry in which the company operates is highly competitive. Hence margins can be vulnerable to pricing pressure and it is imperative to control costs to mitigate the same
Foreign exchange fluctuation :
The company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions primarily with respect to USD, GBP and EURO. Exports are 28% of the total sales and imports are 24% of the total purchase. GFL has hedging forex exposure of upto Rs. 220 Crs as on date from State Bank of India.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as debited in the Rating Criteria detailed below ( hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: The rating may be upgraded upon sustained improvement in overall EBITDA leading to deleveraging.

Negative: The rating outlook may be revised downward in case revenues and EBITDA of the company substantially deteriorates from current level. Rating may also be adversely affected in case of adequate deterioration in gearing and coverage ratios.

LIQUIDITY INDICATORS - Adequate

Company has Cash Credit facility of Rs. 207 crs (reduced in FY21 from Rs. 219 Cr) and its average utilisation of the fund-based limits ranges from 60% - 70% over the 6 months ended July 2021 of the disbursed limit. Company has cash accruals( profit after tax plus depreciation) of Rs 66.10 Cr in FY21 improved to Rs. 31.60 Crs in FY20 against the CPLTD of Rs. 16.23 Crs paid in FY 21. Company has cash generated from operating activities has improved to Rs. 116.76 Crs in FY21 from Rs. 11.96 Crs in FY20. In order to safeguard the company from any financial loss from the pandemic relating to Covid -19, the company availed the benefit of moratorium provided by RBI for the payment of Term Loan installment and interest payment on Working capital facilities. However, the company has repaid all the installments in the month of July 2020 falling due till July 2020 for Term Loans and Interest on working capital facility was repaid in Aug 2020.

ABOUT THE ENTITY

Ginni Filaments Ltd was incorporated in 1982 by Mr. Rajaram Jaipuria and Mr. Shishir Jaipuria, promoters of the company. The overall business of the company is divided into two categories :- one is traditional business which include yarn, knitted fabric and knitted garment business and second is technical textile business which include non woven fabric and its converted products like wet and dry wipes. Company is now venturing into cosmetic manufacturing activities also. The company derived the majority of revenue (42% of Sales) from sales of cotton yarn, 28% from non-woven fabrics, 5% from garments, 11% from fabrics and rest from wipes and other products (these include cosmetic products for Johnson and Johnson and for Future Group (now taken over by Reliance)). The company is now capable of manufacturing 22,000 MT yarn per annum (67,584 spindles and 1,680 rotors), 3,530 MT knitted fabric per annum (~41 knitting machines), 10,000 MT non-woven fabric per annum, 10.8 million garments per annum (~750 stitching machines), and around 1,600 million pieces of wipes per annum.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	778.42	788.36
EBITDA	Rs.Crs.	110.69	59.47
PAT	Rs.Crs.	41.30	5.70
Tangible Net Worth	Rs.Crs.	238.60	185.44
Total Debt/Tangible Net Worth	Times	0.96	1.67
Current Ratio	Times	1.15	1.11

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	207.00	BWR BBB+/Stable (Upgrade)	18Sep2020	BWR BBB (Stable) (#Upgrade)	30Sep2019	BWR BBB- (Stable) (#Initial)	NA	NA
Non Fund Based	ST	62.17	BWR A2 (Upgrade)	18Sep2020	BWR A3+ (#Upgrade)	30Sep2019	BWR A3 (#Initial)	NA	NA
Grand Total		269.17	(Rupees Two Hundred Sixty Nine Crores and Seventeen lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Neha Wahi Ratings Analyst Board : +91 11 2341 2232 nehawahi@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ginni Filaments Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of Baroda	Cash Credit - Sanctioned	56.00	_	56.00
2	Bank of Baroda	Letter of Credit - Sanctioned	_	13.00	13.00
3	Bank of Baroda	Bank Guarantee - Sanctioned	_	1.00	1.00
4	Federal Bank	Cash Credit - Sanctioned	21.00	_	21.00
5	Federal Bank	Letter of Credit - Sanctioned	_	8.60	8.60
6	HDFC Bank	Cash Credit - Sanctioned	20.00	_	20.00
7	HDFC Bank	Letter of Credit - Sanctioned	_	5.00	5.00
8	State Bank Of India (SBI)	Cash Credit - Sanctioned	110.00	_	110.00
9	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	28.00	28.00
10	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	2.00	2.00
11	State Bank Of India (SBI)	Forward Contract - Sanctioned	_	4.57	4.57
12	UCO Bank	Cash Credit - Sanctioned	_	_	0.00
13	UCO Bank	Letter of Credit - Sanctioned	_	_	0.00
Total			207.00	62.17	269.17
TOTAL (Rupees Two Hundred Sixty Nine Crores and Seventeen lakhs Only)

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