Jayalakshmi Silks Private Limited

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 41.50 Crs. of Jayalakshmi Silks Private Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (29 Sep 2022)	Present
Fund Based	46.50	41.50	Long Term	BWR BBB- /Stable Downgraded/ISSUER NOT COOPERATING	BWR BBB /Stable removal from ISSUER NOT COOPERATING* category/Upgraded
Grand Total	46.50	41.50	(Rupees Forty One 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 annual surveillance for Jayalakshmi Silks was due on 29.06.2022 and the rating was moved to Issuer Not cooperating on 29.09.2022 and downgraded to BWR BBB- Stable from BBB Stable as the company had not provided sufficient information for review. As the client has submitted the documents now and based on the financial performance and the acceptable projections, BWR has upgraded the rating to BWR BBB Stable and removed from the Issuer not cooperating Category.

KEY RATING DRIVERS

Credit Strengths:

Experienced management & long track record of operations : :
The promoters have experience of more than three decades in the retail textile sector. The Company has been engaged in this business since 1947 in the name of Jayalakshmi store.
Established brand and locational advantage : :
Jayalakshmi Brand has an established presence in the retail textile business in Kerala for more than Six decades. It is a well-known brand i.e Jayalakshmi among customers in Kerala (at Ernakulam, Trivandrum, Calicut and Thrissur) and has 4 showrooms located in the prime business areas enabling higher footfalls. It has one showroom in Karnataka in Mangalore.
Moderate Financial risk profile: :
The company had faced a dip in its operating Income in FY 20-21 due to the Covid Pandemic. Thereafter in FY 21-22 it recorded growth in operating income of Rs 401.93 Crs over Rs 314.93 crs (FY 21). The company expects to come out of the pandemic dip and also surpass pre pandemic level operating income by FY 23. The same is justified as per the half year figures provided by company. Gearing is low at 0.33x as on 31Mar2022 Further, the debt protection metrics have remained comfortable with DSCR and ISCR at 2.485x and 4.696x in FY22 and are likely to remain comfortable over the medium term on account of healthy cash accruals.

Credit Risks:

High competition in the apparel retail market is likely to maintain pricing pressure: :
The company operates in a highly fragmented and competitive domestic market, dominated by the unorganised sector. This impacts the margins and keeps up the pricing pressure, especially given the company’s presence in the economy segment of apparels. Given the high proportion of fixed costs and the consistent additional advertisement expenses, revenue fluctuations will continue to have a bearing on profitability. However, the overall textile industry is predicted to show robust growth in coming years
Recovery from Impact of Covid 19 pandemic :
Operating performance of the company was impacted during 4th quarter of FY20 as well as 1st quarter of FY21 as Covid-19 pandemic impacted the demand-supply scenario for the entire sector. The company had ramped up the operations from August 2020. Due to the cascading effect of the Covid-19 pandemic, Operational performance had been low in FY 20 and 21. But the company is slowly getting back to pre-pandemic levels by achieving total income of Rs 401.93 crs in FY 22 and is expected to reach the pre pandemic levels by FY 22-23.
Working capital intensive nature of operations: :
The Company’s operations are working capital intensive operations as reflected by higher inventory owing to the nature of the business.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the Standalone financial statements up to FY 2021- 2022, as well as publicly available information and the information/clarification provided by the Company and the Lenders. The standalone approach has been adopted as there is no dependability on other group companies.

RATING SENSITIVITIES

Going forward, the ability of the company to achieve projected revenue & profitability margins and manage liquidity would be the key rating sensitivities.

Upwards: A rating upgrade is possible in case of an improvement in revenue growth and profitability, together with efficient management of working capital requirements, which will strengthen the credit profile. In addition, widening its geographical presence and strengthening its brand will also render support to the credit profile.

Downwards: A pressure on revenue growth and profitability due to factors including, but not limited to, the prolonged impact of the pandemic, deterioration in gearing and debt coverage metrics, profitability, stretched liquidity position, may result in a downward pressure on the ratings.

LIQUIDITY INDICATORS - Adequate

Liquidity profile of JSPL is marked adequate by sufficient net cash accruals of Rs.12.78 Crs as on 31.03.2022 with repayment obligations of Rs.3.00 Crs and backed by a healthy current ratio of 1.66 times as on 31Mar2022. As per banker feedback the CC limit utilisation is also low. Hence the company is not facing any financial difficulties in meeting its short term obligations.

ABOUT THE ENTITY

Jayalakshmi Silks Private Limited (JSPL) was incorporated in 1994, Ernakulam. Presently the Company is engaged in retailing of Ready-Made Garments of all ages including ethnic wear, western wear, and branded wear. Initially the business was carried by the partnership firm Jayalakshmi from the year 1947 in Cochin, Kerala. In April 2018 for better governance & succession planning, the partnership firm, Jayalakshmi has transferred its business to the Company viz, Jayalakshmi Silks Private Limited, vide Business Transfer agreement. (BTA). The Company has Five outlets at Ernakulam, Trivandrum, Calicut, Mangalore and Thrissur. The Ernakulam store is owned by M/s Jayalakshmi. The other outlets are on lease basis from other lessors. Each showrooms averages around 50000 Sq.ft. They have more than 500 suppliers for various textile products across pan India, with majority of them dealing with them for more than 3 decades.

Mr N. Narayan Kamath is the managing director and other directors are Mrs. N. Govindhan and N. Satheesh Kamath.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)	FY 22-23 (Provisional - Midterm_H1)
Operating Revenue	Rs.Crs.	401.93	314.93	272.97
EBITDA	Rs.Crs.	17.20	21.46	Not Available
PAT	Rs.Crs.	7.35	12.12	Not Available
Tangible Net Worth	Rs.Crs.	119.34	111.91	Not Available
Total Debt/TNW	Times	0.33	0.39	Not Available
Current Ratio	Times	1.66	1.53	Not Available

KEY COVENANTS OF THE FACILITY RATED

Commitment to the credit facilities by HDFC bank is contingent upon:

Absence of any material adverse change in the condition of the Borrower.

Borrower not having defaulted under any financial obligation to any bank or institution in the past.

The borrower being in compliance in all material respects with all laws and regulations applicable to its operations.

The borrower to ensure payment of all taxes/statutory/regulatory/otherwise other financial obligations when due and if not disputed.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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

Facilities	Current Rating (2023)			2022		2021		2020
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	41.50	BWR BBB/Stable (removal from ISSUER NOT COOPERATING* category/Upgraded)	29Sep2022	BWR BBB- Stable (Downgraded/Issuer not cooperating)	29Jun2021	BWR BBBStable (Upgrade)	31Dec2020	BWR BBB-Stable (Downgraded/Issuer not cooperating)
Grand Total		41.50	(Rupees Forty One 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
Anithu Joseph Ratings Analyst anithu.j@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Jayalakshmi Silks Private Limited

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	HDFC Bank	Term Loan - Sanctioned	6.50	_	6.50
2	HDFC Bank	Cash Credit - Sanctioned	25.00	_	25.00
3	HDFC Bank	Over Draft - Sanctioned	10.00	_	10.00
Total			41.50	0.00	41.50
TOTAL (Rupees Forty One Crores and Fifty lakhs Only)

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