RATING RATIONALE
31Aug2021

Kallam Textiles Ltd(Formerly known as Kallam Spinning Mills Ltd)

Brickwork Ratings reaffirms the rating for the Bank Loan Facilities of Rs. 369.74 Crs. of Kallam Textiles Ltd (Formerly known as Kallam Spinning Mills Ltd)

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(22 Feb 2021)
Present
Fund Based 307.82 338.74 Long Term BWR D
Removed from Credit Watch and Downgraded
BWR D
Reaffirmation
30.00 30.00 Short Term BWR D
Removed from Credit Watch and Downgraded
BWR D
Reaffirmation
Non Fund Based 1.00 1.00 Short Term BWR D
Removed from Credit Watch and Downgraded
BWR D
Reaffirmation
Grand Total 338.82 369.74 (Rupees Three Hundred Sixty Nine Crores and Seventy Four 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

The rating reaffirmation continues to reflect delay in meeting debt obligation i.e. repayment of TL principal amount  with one of the lenders and resultantly account classification being SMA-1 as confirmed by the Lender. Additionally, BWR notes the corporate governance concerns as reflected in the recent removal of the Company Secretary and Compliance Officer of the company with effect from 07Aug2021 due to breaking the code of conduct, committing fraud, violation of employment agreement, guilty of professional Misconduct and unauthorized filing of resignation to the BSE Ltd & MCA. BWR also takes cognizance of the delayed submission of No Default statement (NDS) by the company to Brickwork Ratings (BWR) on 06Aug2021. The NDS submitted by the company declares the default in repayment of principal amount on term loans as cited in their press release dated 06Aug2021. 

The ratings continue to factor the seasonality associated with the availability of cotton, working capital intensive operations, strained liquidity and the exposure to forex risks. Susceptibility of the company's revenues to textile demand conditions and raw material price volatilities continue to constrain the ratings. The ratings, however, continue to draw strength from the experience of the promoters in the textile industry, integrated operations (ginning, spinning, weaving, dyeing), long track record of the company and established relationships with clients and suppliers.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

While assigning the ratings, BWR has applied its rating methodology as detailed at the end of the document. The company does not have any subsidiary as on 31Mar2021.

RATING SENSITIVITIES

Ability of the company to timely service its debt service obligations, improve its scale of operations and profitability, improve gearing, debt coverage metrics and liquidity position, prudently manage working capital requirements and strengthen its overall credit profile would be the key rating sensitivities.

Positive:

Negative:

LIQUIDITY INDICATORS - Stretched

The company's liquidity is stretched as reflected in the recent delay in debt servicing, insufficient net cash accruals to service debt repayments, low cash & cash equivalents, subdued current ratio and debt coverage metrics and stretched cash conversion cycle. EBITDA was just able to cover the finance cost in FY21. Net cash accruals of FY21 were insufficient to cover the debt repayments scheduled for the year.  Average working capital limit utilization in past 6 months was ~90-95%.  Cash & cash equivalents compared to the scale of operations were low at Rs. 3.97 Crs as on 31 Mar 2021. High short term working capital borrowings continue to keep the current ratio subdued below one. Cash conversion cycle further stretched to 214 days as on 31Mar2021 due to elongation of days inventory. The company's liquidity position is  expected to be supported by realisation of state government subsidy receivables and shall be a key rating monitorable.

ABOUT THE ENTITY

Kallam Textiles Limited (“KTL”), formerly known as Kallam Spinning Mills Ltd , is a listed company on BSE. It was established in 1992 with its registered office at Guntur, Andhra Pradesh. KTL is an integrated cotton textile unit, with its own ginning, ring spinning, open end spinning, weaving and dyeing divisions. The spinning mill is located at Guntur and the weaving division is located in Addanki (Mandal), Prakasam district. The company currently operates with 59280 ring spindles, 2912 rotors for open end spinning, 28 Ginning machines and automatic baling press and 248 Air-jet/ Rapier looms. Yarn dyeing capacity is around 3000 kg per day and woven fabric capacity is 80,000 meters per day. The company also has three Hydel Power Plants of total capacity of 4 MW and one solar power plant of 3 MW. Revenue from power units contributes less than 1%of the total revenue y-o-y. Exports contributed around 40% of total sales in FY21 with China, Thailand, South Korea and Vietnam being the main export markets.

Mr. P. Venkateswara Reddy is the Chairman and Managing Director.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 240.62 291.61
EBITDA Rs.Crs. 25.19 21.04
PAT Rs.Crs. -7.90 -12.09
Tangible Net Worth Rs.Crs. 86.01 93.59
Total Debt/Tangible Net Worth Times 4.18 3.50
Current Ratio Times 0.90 0.80
KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.


STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not applicable

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
Facilities Current Rating (2021) 2021 (History) 2020 2019 2018
Type Tenure Amount
(Rs.Crs.)
Rating Date Rating Date Rating Date Rating Date Rating
Fund Based LT 338.74
BWR D
(Reaffirmation)
22Feb2021
BWR D
(Removed from Credit Watch and Downgraded)
04Mar2020
BWR BBB-Stable
(Downgraded)
30Aug2019
BWR BBBStable
(Reaffirmed)
29Aug2018
BWR BBBStable
(Upgraded)
NA
NA
NA
NA
11Aug2020
BWR BB+Stable
(Downgraded)
NA
NA
NA
NA
NA
NA
NA
NA
22Oct2020
BWR BB+Credit Watch with Developing Implications
(Placed on Credit Watch with Developing Implications)
NA
NA
NA
NA
Fund Based ST 30.00
BWR D
(Reaffirmation)
22Feb2021
BWR D
(Removed from Credit Watch and Downgraded)
11Aug2020
BWR A4+
(Downgraded)
NA
NA
NA
NA
NA
NA
NA
NA
22Oct2020
BWR A4+Credit Watch with Developing Implications
(Placed on Credit Watch with Developing Implications)
NA
NA
NA
NA
Non Fund Based ST 1.00
BWR D
(Reaffirmation)
22Feb2021
BWR D
(Removed from Credit Watch and Downgraded)
04Mar2020
BWR A3
(Downgraded)
30Aug2019
BWR A3+
(Reaffirmed)
29Aug2018
BWR A3+
(Upgraded)
NA
NA
NA
NA
11Aug2020
BWR A4+
(Downgraded)
NA
NA
NA
NA
NA
NA
NA
NA
22Oct2020
BWR A4+Credit Watch with Developing Implications
(Placed on Credit Watch with Developing Implications)
NA
NA
NA
NA
Grand Total 369.74 (Rupees Three Hundred Sixty Nine Crores and Seventy Four 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

Swarn Saurabh

Senior Rating Analyst swarn.s@brickworkratings.com

Saakshi Kanwar

Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Kallam Textiles Ltd(Formerly known as Kallam Spinning Mills 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 CreditSanctioned 5.00 _ 5.00
2 Bank of Baroda Term LoanOut-standing 3.86 _ 3.86
3 Indian Bank Cash CreditSanctioned 60.00 _ 60.00
4 Indian Bank Term LoanOut-standing 73.75 _ 73.75
5 Indian Bank Bill Discounted (BD)Sanctioned _ 20.00 20.00
6 Indian Bank GECLSanctioned 30.36 _ 30.36
7 Union Bank of India Cash CreditSanctioned 90.00 _ 90.00
8 Union Bank of India Term LoanOut-standing 50.35 _ 50.35
9 Union Bank of India Bill Discounted (BD)Sanctioned _ 10.00 10.00
10 Union Bank of India Bank GuaranteeSanctioned _ 1.00 1.00
11 Union Bank of India GECLSanctioned 25.42 _ 25.42
Total 338.74 31.00 369.74
TOTAL (Rupees Three Hundred Sixty Nine Crores and Seventy Four lakhs Only)
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