Magsons Exports

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 14.00 Crs. of Magsons Exports

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (23 Dec 2020)	Present
Fund Based	14.00	14.00	Short Term	BWR A4+ Reaffirmation	BWR A4 + Reaffirmation
Grand Total	14.00	14.00	(Rupees Fourteen 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

BWR has reaffirmed the ratings of Magsons Exports to BWR A4+. The reaffirmation of the ratings reflects the improvement in operating margin, ISCR and DSCR. The tangible net worth of the company has slightly improved in FY21(audited) and projected to increase more in FY22(projections). The ‘Stable’ outlook indicates a likelihood of rating change over the medium term. The company continues to derive comfort from the extensive experience of more than four decades of the promoters in the industry. The rating outlook may be revised to positive with improvements in the profitability and liquidity metrics. The rating is, however, upgraded by the Liquidity position , Debt protection metrics and improvement in Financial parameters. The rating is, constrained by exposure to the fluctuations in raw materials and stiff competition from established players in the market. BWR expects that the firm’s performance is likely to be maintained over the next few years.

KEY RATING DRIVERS

Credit Strengths:

Debt Protection Metrics :
DSCR and ISCR of the company stand at 1.61 and 1.95 respectively in FY indicating company’s adequacy to meet its debt obligations
Experienced promoters and established track record in readymade garments (RMG) exports business :
The promoters have decades of experience in the RMG export business and the firm has established long term relationships with various overseas clients in multiple countries which drives its major sales.
Improvement in Financials :
There is overall improvement in financials for the year FY21. It is projected to Improve more in FY22.

Credit Risks:

Competition in the Industry :
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability
Exposure to the fluctuations in raw material prices and foreign exchange rates :
The firm usually maintains a large inventory of cotton yarn, its main raw material which exposes it to any unfavorable price movements in the yarn prices. The firm is also exposed to the foreign exchange rates fluctuations as all the sales is derived from exports.
Impact of Covid-19 and Concentration risk :
Textile sector is highly unorganized sector. The government has initiated special measures to help ameliorate the conditions in textile sector due to Covid-19 pandemic and to boost production, marketing and job opportunities in the sector. The current fiscal has been adversely affected by the pandemic and textile and readymade garments is one of the most affected industries.

Concentration Risk occurs because 43% of the total sales is hold by the single customer

ANALYTICAL APPROACH - Standalone

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 forward, the ability of the company to improve its scale of operations, reduction in operating expenses, improve its profitability margins, the debt servicing capability & liquidity would be key rating sensitivities.
Upgrade : The rating may be revised for an upgrade if the company is able to achieve significant growth in revenue along with a significant improvement in profit margins, DSCR/ISCR ratio and sustained improvement in net worth.
Downgrade : The rating may be revised negatively if revenue and profit margins substantially deteriorate from current level and if there is an overall deterioration in the financial risk profile of the entity. Any additional borrowing by the company may lead to further deterioration in debt protection metrics and profit margins.

LIQUIDITY INDICATORS - Adequate

The Company has a Cash & Bank balance of INR 0.71 Crs in FY21(Audited) and INR 1.15 Crs in FY22(Projected).
The current ratio of the company is 1.41x in FY21(Audited) and 1.44 in FY22 (projected), which is above the industry average.
Net Cash Accruals has decreased from Rs. 3.01 Crs. in FY20 to Rs. 2.59 Crs. in FY21 against the nil CPLTD . Net Cash Accruals estimates to marginally increase to Rs. 2.60 Crs in FY22 (Projected) against Rs. 0.65 Crs CPLTD. This implies that Net Cash Accruals are adequate to pay off the CPLTD in FY22.
Gearing Ratio (Total Debt/TNW) has improved from 2.87X in FY20 to 2.64X in FY21. It is estimated to improve to 1.65X in FY22.
DSCR has improved in FY21 from 1.49X in FY20 to 1.61X in FY21 and it is further projected to deteriorate to 1.40X in FY22 on the basis of projected Financials.
ISCR has improved from 1.47X in FY20 to 1.95X in FY21 and expected to improve to 2.31X in FY22 on the basis of projected Financials.
Packing Credit Limit Utilization is 99.45%
Hence, Overall liquidity is Adequate.

ABOUT THE ENTITY

Magsons Exports is a partnership firm established in 1979 and is headquartered at D-41, Okhla Industrial Area,Phase-I, New Delhi. The firm is managed by its partners Mr. Varinder Magu, Mr. Baldev Raj Magu and Mrs.Aarti Magu.

The firm is a Government of India recognized and certified Star Export House having its principal exports market in companies from USA, Europe, Canada, South America and South Africa. Ladies And Children's Woman and Knitted Readymade Garments and Scarves.

The firm is into manufacturing and exporting readymade garments for women and children. The firm has its manufacturing and processing facilities in Okhla, Gurgaon and Manesar.

Magsons Exports is one of the biggest production units spread in an area of 20,000 sq.ft.and is equipped with the latest machinery and technology which includes the following: 700 juki stitching machines (lock stitch single needle & double needle , Over Locks Cross Stich / Lock Stich / Button Hole /Snapsetc.) One 20 header barudan computer embroidery machine and one 4 header computer embroidery machine A complete washing unit consisting of PERK Machne . Tumblers, Hydro and other washing equipments.

They have an overall floor area of 5,60,000 sq. ft. spread over 4 different location our unit have complete set up for cutting , Manufacturing Embroidery, Checking Washing , Finishing, Packing etc. The Unit are situated at Industrial area at okhla, Udyog Vihar- Gurgaon Pace City-Manesar having big Showroom at Gurgaon.

They have 700 Juki stitching machine , running under assembly line system , split into 4 unit , having in-house production for Woven & Knit garments. Our machine include Lock Single Needle and Double Needle, Over Locks , Elastic Insertion , Fusing Machine , Computer Embroidery, Piccoting , Shell Stich /Lock Stich Button / Button Hole /Snaps, Dry Cleaning , Perk Chloro Plants, Washing Machine and set of 84 Steam Boiler Irons.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	66.93	70.67
EBITDA	Rs.Crs.	4.54	3.34
PAT	Rs.Crs.	2.10	2.41
Tangible Net Worth	Rs.Crs.	11.62	10.56
Total Debt/Tangible Net Worth	Times	2.64	2.87
Current Ratio	Times	1.41	1.30

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	ST	14.00	BWR A4+ (Reaffirmation)	NA	NA	23Dec2020	BWR A4+ (Reaffirmation)	16Sep2019	BWR A4+ (Assignment)
Grand Total		14.00	(Rupees Fourteen 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

Analytical Contacts
Yashika Goyal Ratings Analyst yashika.g@brickworkratings.com	Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Magsons Exports

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	Canara Bank	Packing Credit (PC)	_	9.00	9.00
2	Canara Bank	FDB/FBE	_	5.00	5.00
Total			0.00	14.00	14.00
TOTAL (Rupees Fourteen Crores Only)

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