Youngman Woollen Mills Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.63.00Crs. of Youngman Woollen Mills Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (08 Jun 2021)	Present
Fund Based	37.00	52.00	Long Term	BWR BBB- /Stable Assignment	BWR BBB - /Stable Reaffirmation
	26.00	8.00	Short Term	BWR A3 Assignment	BWR A3 Reaffirmation
Non Fund Based	0.00	3.00	Short Term		BWR A3 Reaffirmation
Grand Total	63.00	63.00	(Rupees Sixty Three Crores 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 (BWR) reaffirms the ratings for the bank loan facilities of Rs.63.00 Crs of Youngman Woollen Mills Pvt Ltd (YWMPL or the company). This reaffirmation factors in the company’s long track record of operations, experienced promoters and satisfactory financial risk profile in FY21 and FY22 (provisional), along with the established distribution network across India. 

The ratings are, however, constrained by the moderate profitability margins, fragmented nature of the industry, seasonal nature of the product and working-capital-intensive nature of the business. 

The outlook remains Stable as YWMPL reported a subdued performance in FY21 and FY22 (provisional). BWR believes that the company's business and financial risk profile is likely to be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term. The outlook may be revised to Positive in case revenue and profitability show a sustained and significant improvement, leading to an improved solvency and liquidity profile. The rating outlook may be revised to Negative in case there is a significant moderation in the operating income and profitability margins, aggressive debt-funded capex plans or a significant deterioration in the company’s overall liquidity profile.

 

KEY RATING DRIVERS

Credit Strengths:

• Established track record and experienced management :

  YWMPL has been in this business since 1981, which shows a long track record of operations and is promoted and managed by the Jagota family. Mr Ramesh Jagota has more than five decades of experience and is well-supported by his sons Mr Dishant Jagota and Mr. Nitesh Jagota. YWMPL has a well-qualified management team with extensive experience of more than 30 years.

   

• Satisfactory overall financial risk profile :

  The company’s total operating income has fluctuated in the last three years. Revenues declined by 15.26% in FY21 on a y-o-y basis to Rs.191.81cr from Rs.226.36cr in FY20 owing to the covid pandemic and nationwide lockdown. However, the operating income increased by 10.34% y-o-y in FY22 (provisional) to Rs.211.64cr on the back of the easing of government restrictions imposed due to the pandemic. The company’s overall gearing ratio (total debt/ tangible net worth) stood moderate at 1.13x as on 31 March 2021 (PY :1.23x in FY20), which marginally deteriorated to 1.28x, as on 31 March 2022 (provisional) on the back of an increase in the total debt at the end of the year. The interest coverage ratio of the firm remained satisfactory at 3.54x, in FY21 (PY : 2.74x), which marginally deteriorated to 2.96x in FY22 (provisional) on account of an increase in interest expenses.

• Established distribution network across India :

  The group derives the majority of its revenue from mink blankets (which contributes to 60%-70% in total sales) and has an established market position in this segment. Furthermore, the company has a wide marketing network with 1800 dealers, including 100 distributors spread across the country, and caters to 800-1,000 retailers. The company has majorly covered the North region- Punjab, Himachal Pradesh, Jammu and UP, among others, for blankets and Calcutta, Delhi, Bangalore for fabric (generally sells to manufacturers and exporters). The company also exports its product to European countries, which contributed around ~5.59% of the total revenue in FY22 (around Rs.11.83cr against the total sales of Rs.211.64cr in FY22, provisional).

Credit Risks:

• Moderate profitability margins :

  During FY21, the company has reported a moderate operating margin of 7.21% (FY20: 6.32%) and net margin of 2.43% (FY20: 1.86%) providing less cushion against any financial adversity. The company’s profitability margins, however, deteriorated in FY22 (provisional), but remained moderate with the operating margin at 6.93% and net margin at 1.64% in FY22 (provisional). The marginal decline in profitability is largely due to  the increase in operating expenses from 92.78% in FY21 to 93.07% in FY22 (prov), along with the increase in interest and depreciation cost. 

   

• Fragmented nature of the industry :

  YWMPL operates in the textile industry, which is highly fragmented due to the presence of numerous small and unorganised players catering to localised markets and resorting to price-cutting, especially at the low end. The company also has to compete with established domestic players in the Indian Blanket Industry and cheaper Chinese imports. 

   

• Working capital intensive nature of operations :

  The company’s operations continue to remain working-capital-intensive owing to the high inventory holding period due to the nature of business. The company has an operating cycle of 107 days in FY21, which elongated to 123 days in FY22, owing to higher inventory period of 133 days in FY22, increased from 104 days in FY21. The trade payable remains at low levels as the company usually needs to make advance payments for its raw material purchases. This has resulted in high reliance on the working capital borrowings, leading to the high utilisation of its fund-based facilities. Thus, the management of the working capital will remain a key rating sensitivity factor over the medium term.

   

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale). BWR has principally relied on the standalone audited financial results of Youngman Woollen Mills Pvt Ltd upto 31 March 2021, FY22 provisional financials, projected financials for FY23 and FY24, and publicly available information/ clarifications provided by the company’s management.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upwards upon significant and sustained improvement in the total operating income and overall profitability, leading to a significant improvement in the solvency and liquidity profile. 

Negative: BWR may revise the rating downwards in case there is substantial decline in revenues and profitability from current level. The rating may also be adversely affected in the case of a sustainable deterioration in the gearing and coverage ratios.

 

LIQUIDITY INDICATORS - Adequate

The company has a moderate to adequate liquidity profile, as marked by its moderate current ratio of 1.45x as on 31 March  2021 and 1.36x as on 31 March 2022 (provisional). The company generated cash accruals of Rs.8.95cr in FY21 against a debt obligation of Rs.3.20cr. For FY22 (provisional), the company achieved cash accruals of Rs.8.03cr and is expected to generate cash accrual of Rs.8.68cr in FY23, against which the company has a principal debt repayment of Rs.3.85cr in FY23. The average utilisation of the working capital limit vs. the company’s drawing power remained high at ~98% for the 12-month period ended May 2022. During such period, the company has also availed adhoc limits from lenders to meet its working capital requirements. The company has a working-capital-intensive nature of business, due to which the operating cycle of the company was elongated y-o-y to 123 days in FY22 (provisional) from 107 days in FY21 and from 82 days in FY20, leading to a high inventory holding period of 133 days in FY22 (PY 104 days). Thus, the credit risk profile of the company remains sensitive to the management of its working capital while maintaining adequate liquidity.

ABOUT THE ENTITY

Incorporated in 1981, Youngman Woollen Mills Private Limited (YWMPL) manufactures polyester blankets, mink blankets and Hi-pile fabrics. Youngman Group has three manufacturing plants across Himachal Pradesh and Ludhiana, spread over 30 acres of land with a capacity of 60 lakh pieces of blankets and 45 lakh kg of fabric. YWMPL is promoted by the Jagota family, having more than five decades of experience in the same line of business. The group mainly caters to the domestic market through a wide network of agents across India. YWMPL is also engaged in exports, which accounts for 5-10% of the total revenue. Youngman Synthetics (YS), another group company in Una, Himachal Pradesh, is into the same line of business and has common management and strong business and financial linkages with YWMPL as it supplies the majority of its production to YWMPL.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	191.81	226.35
EBITDA	Rs.Crs.	13.83	14.31
PAT	Rs.Crs.	4.66	4.21
Tangible Net Worth	Rs.Crs.	45.13	40.47
Total Debt/TNW	Times	1.13	1.23
Current Ratio	Times	1.45	1.30

KEY COVENANTS OF THE FACILITY RATED

NA

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

Issuer not cooperating by CRISIL vide press release dated January 30, 2022 due to non-availability of information.

ANY OTHER INFORMATION

NA

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	52.00	BWR BBB-/Stable (Reaffirmation)	08Jun2021	BWR BBB- Stable (Assignment)	NA	NA	NA	NA
Fund Based	ST	8.00	BWR A3 (Reaffirmation)	08Jun2021	BWR A3 (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	3.00	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		63.00	(Rupees Sixty Three Crores 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

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies
• Short Term Debt

Analytical Contacts
Akanksha Senior Ratings Analyst akanksha@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@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	HDFC Bank	Working Capital Term Loan - Sanctioned	_	_	0.00
2	HDFC Bank	Cash Credit - Sanctioned	20.00	_	20.00
3	HDFC Bank	GECL - Out-standing	3.48	_	3.48
4	ICICI Bank	Cash Credit - Sanctioned	16.00	_	16.00
5	Others	Cash Credit - Proposed	6.25	_	6.25
6	Others	BG/LC/ILC - Proposed	_	3.00	3.00
7	Standard Chartered Bank	Term Loan - Out-standing	2.87	_	2.87
8	Standard Chartered Bank	GECL - Out-standing	3.40	_	3.40
9	Standard Chartered Bank	Bill Discounted (BD) - Sanctioned	_	_	0.00
10	Standard Chartered Bank	Overdraft - Sanctioned	_	8.00	8.00
Total			52.00	11.00	63.00
TOTAL (Rupees Sixty Three Crores Only)