My Home Collection Pvt Ltd

Brickwork Ratings removes from issuer not cooperating category, upgrades the long-term rating and reaffirms the short-term rating for the Bank Loan Facilities of Rs. 34.50 Crs of My Home Collection Pvt Ltd

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (01 Feb 2021)	Present
Fund Based	6.00	6.00	Long Term	BWR B+/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB - /Stable Upgrade
Fund Based	28.50	28.50	Short Term	BWR A4 Reaffirmation/ISSUER NOT COOPERATING*	BWR A4 Reaffirmation
Grand Total	34.50	34.50	(Rupees Thirty Four Crores and Fifty 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 removal from issuer not cooperating category, upgrade in the long term rating and reaffirmation the short term rating of My Home Collections Pvt Ltd (MHCPL or the company) factors in its cooperation in submitting relevant financial data and necessary updates, stable operaing revenues and net margins besides being strategically located in the carpet manufacturing belt in UP. The ratings continue to derive comfort from the extensive experience of the promoters in manufacturing and exports of carpets.

The ratings are, however, constrained on account of the company’s small scale of operations, high gearing, unstable debt protection metrics, exposure to foreign exchange risks and volatility in raw material prices, working capital intensive nature of the operations and highly competitive industry due to large numbers of players in the unorganized sector.

Rating Outlook: Stable

BWR believes that MHCPL's business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium time. 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

Credit Strengths:

Long track record of the promoter :
Mr. Rizwan Ansari, the promoter, has a long experience of over 2 decades in the carpet manufacturing industry and this has helped the firm to establish a strong brand image that has culminated into repeat orders from overseas buyers
The strategic location of the manufacturing unit :
The company’s manufacturing facilities are located in Bhadohi, UP, which is one of the largest hubs in India for floor coverings and is a MSME cluster for these products. Further, skilled labor is also available by virtue of it being situated in the carpet manufacturing hub.
Moderate debt protection metrics :
The ISCR and DSCR of the company deteorated substantially due to decline in EBITDA in FY20, ISCR and DSCR stood at 0.44x and 1.04x respectively in FY20 (PY: ISCR of 1.01x and DSCR of 1.05x). Further on the back of improved EBITDA the ISCR and DSCR has improved to1.52x and 1.16x in FY21.
Improved PAT and Operating Profit Margins :
Despite a marginal decline in total operating income of the company in FY21 (prov) the net margin of the company improved to 1.58% in FY21 (Prov) as against 0.90% in FY20 and 0.97% in FY19 Further, OPM of the company has also improved to 5.38% in FY21 (prov) vis a vis OPM of 1.45% in FY20 and 4.13% in FY19 driven by increased revenues from the global markets which is a higher margin driving geography of the company.

Credit Risks:

Consistent decline in revenues :
TOI of the company has witnessed a consistent decline since FY 17 and has registered a negative CAGR of 10.23% for FY 17~21. In FY- 20 the same stood at Rs.54.63Crs ( Export sales of Rs.12.71Crs) vis a vis Rs.56.22Crs in FY19( Export sales of Rs.25.58Crs) registering a decline of 3% in FY20. The revenue has further declined to Rs.46.53Crs in FY21 (Prov) from Rs.54.63Crs in FY20 registering a yoy decline of 14.82% . The decline in sales is due to trade-related disruptions due to COVID 19. As advised by the management the firm has registered a net sales of Rs.30Crs till Aug 2021.
Intense competition :
The Indian carpet industry is characterized by numerous small players and is concentrated in the northern part of India, which includes Kashmir, Jaipur, Panipat, Agra and Bhadohi, Mirzapur contributing a significant portion of India’s total carpet production. Low entry barriers and low investment requirements make the hand-knotted/tufted carpet industry highly lucrative and thus competitive. The firm also faces stiff competition from cheaper carpet imports from China in the same product segment.
Exposure to foreign exchange fluctuation risks and volatility in the raw material prices :
The company’s revenue profile is concentrated overseas, whereas procurement is in the domestic market. Further, the company’s profitability profile is also exposed to volatility in foreign exchange on account of the absence of a board approved hedging policy. Any adverse movement in raw material prices of cotton and woolen yarn and foreign currency will have a negative impact on the company’s scale of operations and cash accruals. However, the price volatility effect is partially set off as the promoter is well experienced in his trade.

ANALYTICAL APPROACH - Standalone

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

RATING SENSITIVITIES

Positives: The rating is sensitive to the achievement of projected revenues, improvement in profitability margins and receipts of advances given to sister companies besides other factors favouring an upgrade.

Negatives: An adverse rating action may be taken in case the firm’s revenues and margins deteriorate substantially from the current levels.

LIQUIDITY INDICATORS - Stretched

The utilization levels of the working capital limits stood at 93%. Further, the Cash accrual is expected at Rs 1.25Crs, against a NIL debt repayment obligation in FY22. The company also has an unencumbered FDR of Rs.0.16 Crs as of 31 Mar 2021 (prov). Further in FY20 the company has insufficient EBITDA to service the debt however, the company has not made any defaults and delays in servicing the interest as the same were backed by need based funding from the promoters and group concerns. However the improved EBITDA in FY21 will add cushion to the liquidity.

ABOUT THE ENTITY

My Home Collections is an exclusive brand in the domestic and export market serving home furnishings industry. Formerly known as Handicraft Collections (India) Pvt. Ltd., the company conceptualized in the year 2000 in India. The company deals in Rugs & Carpets, Bed Covers, Comforters, Quilts, Curtains, Cushions, and other décor accessories.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	54.63	56.22
EBITDA	Rs.Crs.	0.79	2.32
PAT	Rs.Crs.	0.49	0.55
Tangible Net Worth	Rs.Crs.	14.21	13.72
Total Debt/Tangible Net Worth	Times	2.77	2.87
Current Ratio	Times	1.16	1.18

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Issuer Not cooperating by CRISIL ratings for a debt size of Rs.24.50Crs with a rating of CRISIL B/Stable/A4 as on 21 April 2021.

ANY OTHER INFORMATION

Nil

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	6.00	BWR BB-/Stable (Upgrade)	01Feb2021	BWR B+Stable (Downgrade/ISSUER NOT COOPERATING*)	14Jan2020	BWR BB-Stable (Reaffirmation)	25Sep2019	BWR BB-Stable (Reaffirmation/ISSUER NOT COOPERATING*)	15Jan2018	BWR BB-Stable (Assignment)
Fund Based	ST	28.50	BWR A4 (Reaffirmation)	01Feb2021	BWR A4 (Reaffirmation/ISSUER NOT COOPERATING*)	14Jan2020	BWR A4 (Reaffirmation)	25Sep2019	BWR A4 (Reaffirmation/ISSUER NOT COOPERATING*)	15Jan2018	BWR A4 (Assignment)
Grand Total		34.50	(Rupees Thirty Four Crores and Fifty 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 Jain Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com	Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

My Home Collection Pvt 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	Jammu and Kashmir Bank	Cash Credit - Sanctioned	6.00	_	6.00
2	Jammu and Kashmir Bank	Packing Credit (PC) - Sanctioned	_	17.00	17.00
3	Jammu and Kashmir Bank	Post Shipment	_	11.50	11.50
Total			6.00	28.50	34.50
TOTAL (Rupees Thirty Four Crores and Fifty lakhs Only)

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