CRISIL has assigned its ‘BB/Stable/P4+’ ratings to the bank facilities of Nancy Krafts, part of the Nancy Krafts group. The ratings reflect the Nancy Krafts group’s large working capital requirements and weak financial risk profile, marked by weak debt protection measures. These rating weaknesses are partially offset by the benefits that the group derives from its promoters’ experience in the readymade garments business and established relationships with customers.

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of Nancy Krafts, Nancy Krafts Pvt Ltd (NKPL), and Kitty Overseas. This is because the three entities, collectively referred to as the Nancy Krafts group, are in same line of business, and have a common customer base and common promoters and management.

Outlook: Stable
CRISIL believes that the Nancy Krafts group will continue to benefit from its established relationships with customers. However, the group’s financial risk profile is expected to remain weak due to low profitability margins and large working capital requirements, leading to weak debt protection measures. The outlook may be revised to ‘Positive’ if the group’s topline or profitability margin improves, leading to improved debt protection measures and if its working capital management improves. Conversely, the outlook may be revised to ’Negative’ in case of a larger-than-expected deterioration in the group’s capital structure due to large working capital requirements or debt-funded capital expenditure, or decline in profitability margin, exerting pressure on the group’s already weak debt protection measures.

About the Group
Nancy Krafts, set up in 1980 as partnership firm, manufactures readymade garments, specialising in women’s and children’s clothes. Its plant in New Delhi has capacity of around 4000 pieces of garments a day. NKPL, set up in 1981 as a partnership firm, was reconstituted as a private limited company. It manufactures readymade garments for women and children. Its plant in New Delhi has capacity to manufacture around 10,000 pieces a day. Kitty Overseas, a partnership firm set up in 1993, manufactures readymade garments, specialising in women’s and children’s clothes. Its plant, located in New Delhi, has capacity to manufacture around 4000 pieces of garments a day. All the three entities cater to the exports market and supply their products to retailers and wholesalers based in South America, Mexico, the US, and Europe.

The Nancy Krafts reported a book profit of Rs.1.3 million on net sales of Rs.145.1 million for 2008-09 (refers to financial year, April 1 to March 31) against a book profit of Rs.0.8 million on net sales of Rs.7.8 million for 2007-08.