CRISIL has reaffirmed its ratings of ‘BB-/Negative/P4’ to the various bank facilities of Alam Tannery Pvt Ltd (Alam Tannery). The ratings continue to reflect Alam Tannery’s exposure to risks relating to the highly working capital intensive nature of the leather industry, small scale of operations, and intense competition. These weaknesses are, however, partially offset by the company’s stable business risk profile, supported by the experience of its promoters in the leather industry.

Outlook: Negative
CRISIL expects Alam Tannery’s credit profile to be constrained by the current slowdown in the European markets, which contribute substantially to the company’s revenues. This would lead to stretched receivables thus impacting the liquidity position of the company. The outlook may be revised to ‘Stable’ if Alam Tannery’s revenues and profitability increase more than expected. Conversely, the outlook may be downgraded if the company’s capital structure deteriorates significantly on account of debt-funded capital expenditure, or if the working capital requirements increase considerably.

About the Company
Alam Tannery traces its origins to the early 1920s when Mr. Mohammed Hanif set up a raw hide and skin trading centre in North Bihar. The promoter family set up a firm, Maqbul Alam & Co in 1962. The firm began operations by exporting dry salted skin and wet blue leather to the European markets. In 1970, the promoters shifted to Kolkata. Alam Tannery was set up by Mr. Maqbul Alam (son of Mr. Hanif). The company has two tannery units, and currently manufactures leather sofas and chair covers. It markets its products in UK, South Africa, Germany, Poland, Hungary and Australia. For 2008-09 (refers to financial year, April 1 to March 31), Alam Tannery reported a profit after tax (PAT) of Rs.32 million on net sales of Rs.460 million, as against a PAT of Rs. 15 million on net sales of Rs. 455 million for 2007-08.