| Alpine Spinweave Private Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank facilities of Alpine Spinweave Pvt Ltd (ASPL; part of the Aarnav group) at ‘CRISIL BBB-/Stable/CRISIL A3.
The ratings reflect the extensive experience of the promoters in the textile industry, established business position and locational benefit because of proximity to the textile processing hub. These strengths are partially offset by exposure to intense competition, modest debt protection metrics and working capital-intensive operations. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of ASPL, Gopi Synthetics Pvt Ltd (GSPL) and Aarnav Industries Pvt Ltd (AIPL) because of their operational and managerial linkages.
Unsecured loans from the promoters and their family members have been treated as neither debt nor equity as these loans are subordinate to bank debt and are expected to remain in the business over the medium term.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: * Extensive industry experience of the promoters and established business: The promoter, Mr Champalal G Agarwal, is the founder chairman of the entire group. He has more than four decades of experience in the textile business. Another director, Mr Sumit Agarwal, has around 20 years of experience in marketing, finance and general administration. Their extensive industry experience has led to well-established distribution network and strong credit of the group in the industry. Driven by high-quality printing and finishing of cloth, the group has registered healthy revenue. The extensive experience of the promoters will continue to support the business risk profile.
However, moderation in operating performance for fiscal 2021 is expected because of the Covid-19 pandemic. Till September 2020, the group registered sales of about Rs 220 crore and is estimated to close fiscal 2021 with year-on-year decline of 25-30%.
* Locational advantage: The manufacturing facilities are in Ahmedabad, Gujarat, which is one of the major textile processing hubs in India. This provides it with competitive advantage in terms of proximity to raw material, trained work force and marketing.
Weakness: * Working capital-intensive operations: Gross current asses were high at around 205 days, driven by inventory and debtors of around 60 days and 120 days, respectively, as on March 31, 2020. This was supported by creditors of 60-70 days. Operations are likely to remain working capital intensive over the medium term.
Large working capital requirement and moderate credit from suppliers has led to a moderately leveraged capital structure, as reflected in total outside liabilities to tangible networth (TOLTNW) ratio of 2.3 times as on March 31, 2020.
* Exposure to intense competition: The textile industry is largely unorganised, as indicated by the presence of several players with small capacities. The entry barrier is low because of limited capital and technology requirements and small differentiation in end products of different players. This has led to a highly fragmented industry structure, with intense competition. Also, players have limited pricing and bargaining power in case of fluctuations in raw material prices. Hence, the operating margin is moderate at 6-7%. The moderate operating profitability has led to modest debt protection metrics, as reflected in estimated interest coverage and net cash accrual to total debt ratios of 2.01 times and 0.10 time, respectively, in fiscal 2020.
For fiscal 2021, the debt protection metrics are likely to deteriorate on account of expected impact on operating performance. |
Liquidity Stretched Moderate cushion is expected between accrual and debt obligation. Bank limit utilisation was high at 91% for the 12 months ended August 31, 2020 (cash credit limit of Rs 166 crore). Large working capital requirement has led to higher dependence on short-term working capital limits and suppliers, which in turn has led to moderately leveraged capital structure, thus limiting financial flexibility. However, liquidity is supported by unsecured loan from promoters and their relatives and friends of Rs 60 crore as on March 31, 2020 and other short-term loans and advances from business associates of Rs 17 crore on the same date. |
Outlook Stable CRISIL Ratings believes the Aarnav group will continue to benefit from the extensive industry experience of the promoters. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group Incorporated in 1984, GSPL is the flagship company of the Aarnav group. It processes (bleaching, dyeing, printing and finishing) fabrics such as suiting, shirting, dress material and dupattas, and trades in grey fabrics. For processing, it also undertakes job work for other companies.
AIPL processes fabrics such as bedsheets and heavy suiting. The company can process cotton, as well as polyester and blended fabrics, and wider width cloth having maximum width up to 120 inches. This company has been taken over by Mr Champalal Agarwal from his elder brother under a demerger scheme and given its current name. The demerger was effective from April 2013.
ASPL was incorporated in February 2016 and was formed to size and weave cotton yarn. The setting up of the unit was in two phases. The first phase was operational from October 2017 and the second phase from September 2018. The company is promoted by Mr Champalal Agrawal and Mr Sandeep Agrawal. |
Key Financial Indicators
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Status of non cooperation with previous CRA: ASPL has not cooperated with Acuite Ratings and Research Limited (Acuite) which has published its ratings as issuer not co-operating on July 28, 2020. The reason provided by Acuite was non-furnishing of information for monitoring of rating. However the rating was subsequently withdrawn. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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