Gimatex Industries Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 700.00 Crs. of Gimatex Industries Private Limited ("GIPL" or "The Company")

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (06 Aug 2020)	Present
Fund Based	419.38	598.00	Long Term	BWR A-/Stable Reaffirmation with revision in outlook	BWR A - /Stable Reaffirmation
Non Fund Based	102.00	102.00	Short Term	BWR A2+ Reaffirmation	BWR A2 + Reaffirmation
Grand Total	521.38	700.00	(Rupees Seven Hundred Zero 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

The rating reaffirmation continues to take comfort from the extensive experience of the promoters and management of Gimatex Industries Private Limited in the textile industry and diversified customer base. The rating also factors in the integrated nature of operations with presence in the ginning & pressing, spinning, weaving and processing of fabric etc. The company also benefits from the favourable location of the manufacturing unit with close proximity to cotton growing areas. Further, despite the debt-funded capital expenditure plan, the company’s capital structure and coverage indicators continue to remain comfortable given its strong net worth bases and adequate cash accruals in the business.

The rating however continues to remain constrained due to the vulnerability of the company’s operating performance to the inherent cyclicality in the textile industry and also to the disruptions caused by the outbreak of COVID-19 pandemic in FY2021. The relatively higher capex requirement of the company has resulted in moderate return indicators. The rating also remains constrained due to the limited bargaining power of the company resulting in the susceptibility of the profitability margins to volatility in the prices of raw material & finished product along with forex rates. The rating is also constrained by the Company’s presence in a highly fragmented and competitive textile industry.

Outlook: Stable

The outlook continues to remain Stable as the Company will continue to benefit from the extensive experience of its promoters in the textile industry, and from the company increasing focus on the higher value textile products supported by regular capex, which is expected to support its scale of operations and profitability margins in the medium to long term.

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience of promoters and management in textile industry :

  The Company is promoted by the Mohota family, originally hailing from Rajasthan, and is a part of Gimatex Group, a diversified business conglomerate with a presence in textile manufacturing and trading since the last five decades. Apart from textiles, the group also has a presence in the refractory manufacturing and financial services industry. The Company also benefits from a qualified and experienced management, which has helped the Company get repeat orders from its customers.

• Integrated nature of operations, along with location advantage :

  GIPL benefits from the integrated nature of operations with a presence across the ginning and pressing, spinning, weaving and processing of fabric, resulting in operational efficiencies and reducing dependence on one segment. The Company has also set-up a cottonseed processing plant for producing refined cottonseed oil and de-oiled cake (DOC). The Company also benefits from its long standing relations with its diversified customer base with the top 10 customers contributing around 20 percent to the total revenue for FY2021. The manufacturing facility is located near  the cotton growing areas of Vidarbha, Maharashtra. Hence, the Company benefits from low transportation costs and easy access to quality cotton because of its proximity to raw material sources.

• Comfortable financial risk profile :

  The Company benefits from a comfortable financial risk profile, reflected by a tangible net worth of Rs. 326.55 crores and debt to equity ratio at 1.56 times as on 31st March 2021 (provisional).  The interest coverage ratio stood at 1.94 times and debt coverage ratio at 1.39 times for FY2021 (provisional). Going forward, the coverage indicators of the company are expected to remain modest on account of the increase in debt repayment obligations from the additional loans taken by the company for ongoing capacity expansion projects and working capital term loans (WCTL) under the GECL scheme. However, the financial risk profile of the company is expected to be supported by the significant improvement in the net cash accruals and also capital incentives received from the state and central governments in the range of Rs. 5.00 to 6.00 crores every year.

Credit Risks:

• Weaker-than-expected performance :

  The Company reported marginal growth in operating income as the same stood at Rs. 1031.67 crores FY 2021 (provisional) as against Rs. 1010.52 crores in FY2020 inspite of the disruptions caused by the outbreak of COVID-19 pandemic. The stable operating income was supported by the strong recovery in demand in the textile sector and higher realisation for the company's products from the second half of FY2021 onwards. However, the company reported deterioration in operating margin as the same stood at 7.97 percent for FY2021(provisional) as against 9.15 percent in the previous year mainly on account of lower absorption of fixed cost and increase in raw material prices which could not be passed to the customers against limited bargaining power. Further,    profitability of the company is closely linked to the macroeconomic conditions, consumer confidence and spending patterns, particularly considering the discretionary nature of its products.

• Working-capital-intensive operations and susceptibility of profitability to volatility in cotton, yarn prices and forex rates :

  The main raw material for the Company is cotton, and the procurement season for the same is during November to April every year, leading to high inventory holding at the end of every financial year. Hence, it is required to maintain an inventory of four to six months, leading to high working capital requirements. The cotton crop, being an agri-commodity, is dependent on weather conditions and is susceptible to plant pests and diseases, leading to volatility in cotton prices. Consequently, the fortunes of the Company are susceptible to price variations in both raw cotton and processed yarn. Furthermore, the Company also exports to countries including those in East Europe, Bangladesh and South Korea; hence, margins are exposed to volatility in forex rates. However the risk is mitigated to a large extent by way of a natural hedge because the Company also imports raw materials and the utilisation of packing credit in foreign currency to meet export orders. 

• Presence in highly fragmented and competitive industry :

  The textile industry is highly fragmented and competitive, with a presence of a large number of organised and unorganised players, thereby limiting the Company’s bargaining power against its customers. 

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings (BWR) has applied its rating methodology as detailed in the Rating Criteria mentioned in the presentation. BWR has principally relied on the standalone audited financials up to FY20 and provisional financials for FY21, publicly available information and clarification/information provided by the company.

RATING SENSITIVITIES

Positive:

• Significant improvement in the operating income and profitability, resulting in an improvement in the debt coverage indicators
• A significant reduction in the Company’s external debt.

Negative:

• Significant decline in operating income and profitability, leading to a deterioration in the debt coverage indicators and liquidity profile of the Company
• Any time or cost overruns in the ongoing capacity expansion project adversely impacting the company's liquidity profile. 
• Any additional majorly debt-funded capacity expansion plan, resulting in a high leveraged capital structure.

LIQUIDITY INDICATORS - Adequate

GIPL has reported net cash accruals of Rs. 47.64 crores for FY 2021 (provisional) as against annual debt repayment obligation of Rs. 22.56 crores during FY 2021. The current ratio stood at 1.58 times as on 31.03.2021 (provisional). Further, the average working capital limit utilisation is comfortable at around 56 percent for the period from October 2020 to September 2021. The company has availed disbursement of additional term loans to the tune of Rs. 25.66 crores during FY2021 for ongoing capital expenditure purpose and around Rs. 94.34 crores is pending for disbursement. 

The company has also availed additional working capital limit of Rs. 87.21 crores under the COVID-19 emergency credit limit scheme and the same shall be repaid in the next five to six years. The total term loan repayment obligation of the company is estimated to be around Rs. 118.27 crores for the next two years and the same is expected to be adequately met through internal accruals of the company. 

Further, the company expects to receive around Rs. 8~9 crores out of GST refund for FY2021 and thereafter Rs. 12~13 crores every year under the MEGA project scheme from Maharashtra State Government which is expected to support the liquidity profile of the company. 

ABOUT THE ENTITY

Gimatex Industries Private Limited (GIPL or “the company”) was initially incorporated in 1994 as Vibha Synthetics Private Limited with a registered office located in Mumbai, Maharashtra by the Mohota family originally from Rajasthan. The Mohota family has been engaged in business for the last six generations and has several decades of experience in the textile industry. However, after realignment of family ownership structure in 2005, the Wani unit (belonging to Rai Saheb Rekhchand Mohota Spinning and Weaving Mills Limited) was merged into sister concern Vibha Synthetics Limited (VSL) and the new entity was renamed Gimatex Industries Private Limited. The Company’s day-to-day operations are managed by Mr. Prashant Kumar Mohota, who has around 15 years of experience in the textile industry. He is supported by his brothers Mr. Vineetkumar Mohota and Mr. Anuragkumar Mohota.

GIPL is a composite textile unit with a presence in different verticals of the textile industry, including ginning and pressing, spinning, weaving and processing of fabrics. The company is also engaged in forward integration of its ginning unit's by-product and is thereby involved in producing cottonseed refined oil and de-oiled cake. The company has five manufacturing units of which four are located at Hinganghat, Yerala, Wani and Bela near Nagpur respectively while the fifth unit (processing unit) is located at Dhokla, Ahmedabad.  The installed capacity for ginning and pressing stood at 75,000 bales per annum, yarn spinning- 26000 metric tonnes per annum, grey fabric- 375 lakh meters, processing of fabric - 300 lakh meters, cotton seed plant - 260 metric tonnes per day for FY2021. The company derived around 47 percent of its revenue for FY 2021 (provisional) from sale of yarn, ~16 percent from grey fabric, ~11 percent from cotton seed oil, ~7 percent processed fabric, 5 percent each from cotton seed & cotton bales while remaining 9 percent is derived from sale of cotton linter, hulls, de-oiled meal (DOC), waste and also job work income from dyeing & printing for third parties. The key raw material required is cotton and mainly procured from farmers and ginning units located  in Maharashtra and Telangana. The procurement season is from November to April every year. Further, GIPL also procures polyester and viscose fiber as only 35% of the yarn produced is cotton yarn and remaining is blended yarn. The company mainly caters to customers located in Maharashtra, Gujarat and Karnataka which constitutes around 60% of its total sales along with other states in the country. The company is also engaged in export of traded yarn, manufactured yarn and fabric which constitutes around 7% of total sales. The exports are made to countries including Eastern Europe, Bangladesh and South Korea. 

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	1010.52	1124.77
EBITDA	Rs.Crs.	92.45	113.00
PAT	Rs.Crs.	34.68	19.28
Tangible Net Worth	Rs.Crs.	316.06	273.24
Total Debt/Tangible Net Worth	Times	1.53	1.72
Current Ratio	Times	1.51	1.36

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

ANY OTHER INFORMATION

Not Applicable

 

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	598.00	BWR A-/Stable (Reaffirmation)	06Aug2020	BWR A-Stable (Reaffirmation with revision in outlook)	24Apr2019	BWR A-Positive (Reaffirmation with revision in outlook)	06Mar2018	BWR A-Stable (Reaffirmation with revision in outlook)
Fund Based	ST	NA	NA	06Aug2020	BWR A2+ (Reaffirmation)	NA	NA	NA	NA
Non Fund Based	ST	102.00	BWR A2+ (Reaffirmation)	06Aug2020	BWR A2+ (Reaffirmation)	24Apr2019	BWR A2+ (Reaffirmation)	06Mar2018	BWR A2+ (Reaffirmation)
Grand Total		700.00	(Rupees Seven Hundred Zero 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
• Short Term Debt
• Manufacturing Companies

Analytical Contacts
Shashikala Umanath Hegde Senior Ratings Analyst Board : +91 22 2831 1426, +91 22 2831 1439 shashikala.h@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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	Axis Bank Ltd.	Term Loan - Out-standing	60.27	_	60.27
2	Axis Bank Ltd.	Cash Credit - Sanctioned	4.00	_	4.00
3	Axis Bank Ltd.	Cash Credit - Proposed	_	_	0.00
4	Axis Bank Ltd.	Letter of Credit - Sanctioned	_	10.00	10.00
5	Axis Bank Ltd.	Letter of Credit - Proposed	_	_	0.00
6	Axis Bank Ltd.	Working Capital Demand Loan - Sanctioned	6.00	_	6.00
7	Axis Bank Ltd.	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	12.20	_	12.20
8	Bank of Baroda	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	22.85	_	22.85
9	Bank of Baroda	Letter of Credit - Sanctioned	_	52.00	52.00
10	Bank of Baroda	Term Loan - Sanctioned	123.79	_	123.79
11	Bank of Baroda	Cash Credit - Sanctioned	61.60	_	61.60
12	Bank of India	Term Loan - Out-standing	29.77	_	29.77
13	Bank of India	Cash Credit - Sanctioned	33.40	_	33.40
14	Bank of India	Letter of Credit - Sanctioned	_	7.00	7.00
15	Bank of India	Bank Guarantee - Sanctioned	_	2.00	2.00
16	Bank of India	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	15.73	_	15.73
17	HDFC Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	10.81	_	10.81
18	HDFC Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	2.22	_	2.22
19	HDFC Bank	Term Loan - Sanctioned	13.07	_	13.07
20	HDFC Bank	Cash Credit - Sanctioned	30.00	_	30.00
21	HDFC Bank	Cash Credit - Proposed	_	_	0.00
22	HDFC Bank	Term Loan - Out-standing	29.43	_	29.43
23	ICICI Bank	Cash Credit - Sanctioned	15.00	_	15.00
24	ICICI Bank	Letter of Credit - Sanctioned	_	10.00	10.00
25	IDBI Bank	Bank Guarantee - Sanctioned	_	8.00	8.00
26	IDBI Bank	Letter of Credit - Sanctioned	_	8.00	8.00
27	IDBI Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	7.33	_	7.33
28	IDBI Bank	Cash Credit - Sanctioned	20.00	_	20.00
29	IDBI Bank	Term Loan - Out-standing	12.32	_	12.32
30	IDFC First Bank Limited	Cash Credit - Sanctioned	5.00	_	5.00
31	IDFC First Bank Limited	Letter of Credit - Sanctioned	_	5.00	5.00
32	IndusInd Bank	Term Loan - Proposed	9.81	_	9.81
33	IndusInd Bank	Term Loan - Sanctioned	30.19	_	30.19
34	State Bank Of India (SBI)	Cash Credit - Sanctioned	35.00	_	35.00
35	State Bank Of India (SBI)	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	8.21	_	8.21
Total			598.00	102.00	700.00
TOTAL (Rupees Seven Hundred Zero Crores Only)