CRISIL has assigned its ratings of ‘BB/Stable/P4+’ to Paragon Apparel Pvt Ltd’s (Paragon’s) bank facilities. The ratings reflect Paragon’s exposure to risks relating to customer concentration in revenue profile to the Adidas group, volatility in the value of the Indian rupee, and financial risk profile marked by high gearing, small net worth, and average debt protection measures. These rating weaknesses are partially offset by the benefits that Paragon derives from its established relationships with key buyers, and promoters’ experience in the readymade garment industry.

Outlook: Stable
CRISIL believes that Paragon will maintain its relationship with Adidas group over the medium term. The outlook may be revised to ‘Positive’ if Paragon improves its sales realisations and profitability, thereby strengthening its capital structure. Conversely, the outlook may be revised to ‘Negative’ if the company’s profitability declines or if it undertakes large debt-funded capital expenditure, leading to deterioration in debt protection measures.

About the Company
Paragon, incorporated in 1996 by Mr. Roshan Baid, manufactures readymade garments such as t-shirts, tops, shorts, and track pants for men, women, and children. The Adidas group is Paragon’s main customer, as Paragon sells around 90 per cent of its products to the Adidas group (including Reebok International Ltd). Paragon caters to the spring and summer as well as winter collection in knits segment. The company currently has a manufacturing capacity of 400,000 pieces per month. Paragon operates through its two production facilities in Noida. Unit one has the capacity to manufacture 150,000 pieces per month. The second unit, which was started in September 2009, has a capacity to manufacture 250,000 pieces per month.

Paragon reported a profit after tax (PAT) of Rs.11.4 million on net sales of Rs.486.7 million for 2008-09 (refers to financial year, April 1 to March 31), against a PAT of Rs.8.9 million on net sales of Rs.296.8 million for 2007-08.