RATING RATIONALE
28 Jan 2020
Updates Clothing Inc
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.9.00 Crs. of Updates Clothing Inc
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 09.00 | Long Term | BWR BB - (Stable) |
| Sub Total | 09.00 | ||
| Grand Total | 09.00 | (Rupees Nine Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Updates Clothing Inc 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 revisd 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 Updates Clothing Inc of FY17 to FY19 , projected financial statements of FY20 & FY21, publicly available information and information / clarifications provided by the firm. The assigned rating has factored the strength from the extensive experience of the partners and growth in revenues . However, the rating is constrained by limited track record of operations in highly fragmented industry with high gearing levels, susceptibility of profit margins to volatile raw material prices and intense competition from established players in the industry.
Going ahead, the ability of the firm to improve its scale of operations and profitability, achieve the projected revenues and also to infuse additional funds at requirements would be the key rating sensitivities.
Credit Strengths:
- The partners have been in the business of ready made garments for more than a decade . Their experience and relationships with major customers and suppliers will continue to support the business risk profile.
- The revenue of the firm has increased to Rs.40.49 crs in FY19 as compared to Rs.22.90 crs in FY18. As per provisional FY20 (Apr 19 to Dec 19), the firm has achieved sales revenue of Rs.38.68 crs.
Credit Risks:
- The firm has commenced the operations from June 2016. The firm has catered to established clientele since its inception.
- The tangible net worth of Rs.3.54 crs. in FY19 whereas Rs.0.88 crs given as advances to partners in FY19. The gearing of the firm remains high as at 2.38 times in FY19 due to low networth. However, the networth of the firm has increased to Rs.8.14 crs due to additional capital infused by partners during FY19-FY20.
- Susceptibility of profit margins to volatile raw material prices and intense competition from established players in the industry.
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 ahead, the ability of the firm to improve its scale of operations and profitability, achieve the projected revenues and also to infuse additional funds at requirements would be the key rating sensitivities.
LIQUIDITY POSITION
The firm has adequate liquidity profile, driven by current ratio of 1.38 times in FY19 and it is estimated to improve further in the medium term.
PROFILEM/s. Update Clothing Incorp is a partnership firm, established in June 2016 at Bangalore. The partners of the firm are Mr.Jiju Pomath and Mr.Aswin Narayanan. The firm is engaged in manufacturing of hosiery readymade garments for men and kids under the brand name of ‘Frettini’ and “North Republic” At present , the firm concentrates on domestic sales. The current Production capacity is approx 2.5 lakhs through In house production and Job work.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 40.49 | 22.90 |
| EBITDA | Rs.Crs. | 2.32 | 0.80 |
| PAT | Rs.Crs. | 0.87 | 0.44 |
| Tangible Net Worth | Rs.Crs. | 3.54 | 1.50 |
| Total Debt/Tangible Net Worth | Times | 2.38 | 1.37 |
| Current Ratio | Times | 1.38 | 1.25 |
NA
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2019) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 09.00 | BWR BB-(Stable) | NA | NA | NA | |||
| Total | 09.00 | (Rupees Nine 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.
For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Vijayalakshmi R Ratings Analyst B : +91 044 24663326 vijayalakshmi.r@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
K Nagaraj Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 9.00 | _ | 9.00 |
| Total | 9.00 | |||
| TOTAL (Rupees Nine 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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