Rating Rationale
January 17, 2023 | Mumbai
Angel Fibers Limited
Ratings downgraded to 'CRISIL BB/Negative/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.57 Crore
Long Term RatingCRISIL BB/Negative (Downgraded from 'CRISIL BBB-/Stable')
Short Term RatingCRISIL A4+ (Downgraded from 'CRISIL A3')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has downgraded its ratings on the bank facilities of Angel Fibers Limited (AFL) to 'CRISIL BB/Negative/CRISIL A4+' from 'CRISIL BBB-/Stable/CRISIL A3'.

 

The rating downgrade reflects weaker than expected performance due to sharp decline in revenue and reporting of losses during H1FY23, subsequently stretched liquidity due to shutdown of plant backed by shortage of raw material cotton, rise in prices of raw material and disruption in value chain considering sizable term debt obligation. Furthermore, the capital structure of company expected to rise due to availment of COVID lines. The ability of company to revive operations while improving financial risk profile remain key monitorable.

 

The ratings reflect the extensive experience of the promoters and satisfactory debt protection measures. These strengths are partially offset by average, though improving, capital structure, restrained scale of operations and exposure to intense competition.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of the management: Mr Ramesh Ranipa and Mr Jitendra Raiyani acquired AFL from Mr Ashok Dudhagara and Ms Prafulaben Dudhagara in 2020. The current promoters have experience of almost a decade in the textile industry and have turned the company around since taking it over. Continued support from the management (in terms of policies and timely fund infusion by way of unsecured loan) will remain a key monitorable.

 

Satisfactory debt protection measures: AFL’s debt protection measures were healthy with interest coverage and net cash accruals to total debt ratio of 5.3 times and 29% for fiscal 2022. This was supported by sharp rebound in the profitability during the fiscal as also the continued reduction in the debt levels. However, with reporting of losses during H1FY23 and subdue industry scenario, the debt protection metrics expected to remain satisfactory.

 

Weaknesses:

Average financial risk profile: The company had a moderate networth of Rs 31.1 crore and gearing of 2.2 times as on March 31, 2022. Its TOLANW (total outside liabilities to adjusted networth) ratio was moderately high at 2.3 times as on March 31, 2022 and expected to increase to over 2.5 times as on March 31, 2023 due to availment of COVID lines amounting Rs 14.3 crore in April 2022.

 

Subdue scale of operations: The company has an average scale of operations as reflected in the turnover of Rs 253 crore in FY22, however, the same has reduced during H1FY23 with revenue of Rs 58 crore (against Rs 113.8 crore in H1FY22) due to shortage of raw material cotton, rise in prices of raw material and disruption in value chain. The ability of company to revive operations remain key monitorable.

 

Exposure to intense competition: The spinning industry is market by presence of many organized and unorganized players and consequently, companies like AFL faces intense competition.

Liquidity: Stretched

Liquidity is stretch with insufficient cushion between expected accruals and repayment, moderate bank lines, and an availment of COVID lines. However, promoter support in form of infusion of USL as and when required.

Outlook: Negative

CRISIL Ratings believes AFL likely to remain under pressure due to declining revenue, reporting of losses due to subdue industry scenario, and an average financial risk profile.

Rating Sensitivity factors

Upward factors

  • Revival in revenue and operating margin of over 10-11% leading to higher accruals
  • Improvement in financial risk profile

 

Downward factors

  • Decline in interest coverage ratio below 1.3 times
  • Elongation in working capital cycle weakens overall financial risk profile especially liquidity

About the Company

AFL was set up in 2014 by Rajkot-based Mr Ashok Dudhagara and his family and started operations in June 2016. It was acquired by Mr Ramesh Ranipa and Mr Jitendra Raiyani in 2020. Operations are managed by Mr Rohan Kumar Jitendra Raiyani, son of Mr Jitendra Raiyani. AFL manufactures and exports cotton yarn.

Key Financial Indicators

Particulars  Unit  2022 2021
Revenue Rs crore 253.33 139.27
Profit after tax (PAT) Rs crore 9.38 6.93
PAT margin % 3.7 4.98
Adjusted debt/adjusted networth Times 2.19 3.32
Interest coverage Times 5.31 2.7

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of
instrument
Date of
allotment
Coupon
rate (%)
Maturity
date
Issue size
(Rs crore)
Complexity 
levels
Rating assigned
with outlook
NA Bank Guarantee NA NA NA 2.5 NA CRISIL A4+
NA Cash Credit NA NA NA 10 NA CRISIL BB/Negative
NA Long Term Loan NA NA Mar-27 29.64 NA CRISIL BB/Negative
NA Long Term Loan NA NA Mar-23 0.71 NA CRISIL BB/Negative
NA Proposed Long Term Bank Loan Facility NA NA NA 6.75 NA CRISIL BB/Negative
NA Term Loan NA NA Mar-27 7.4 NA CRISIL BB/Negative
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 54.5 CRISIL BB/Negative   --   -- 02-12-21 CRISIL BBB-/Stable   -- CRISIL D (Issuer Not Cooperating)*
      --   --   -- 25-06-21 CRISIL BB+/Stable   -- --
      --   --   -- 28-01-21 CRISIL BB-/Stable   -- --
Non-Fund Based Facilities ST 2.5 CRISIL A4+   --   -- 02-12-21 CRISIL A3   -- CRISIL D (Issuer Not Cooperating)*
      --   --   -- 25-06-21 CRISIL A4+   -- --
      --   --   -- 28-01-21 CRISIL A4+   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 2.5 State Bank of India CRISIL A4+
Cash Credit 10 State Bank of India CRISIL BB/Negative
Long Term Loan 29.64 State Bank of India CRISIL BB/Negative
Long Term Loan 0.71 State Bank of India CRISIL BB/Negative
Proposed Long Term Bank Loan Facility 6.75 Not Applicable CRISIL BB/Negative
Term Loan 7.4 State Bank of India CRISIL BB/Negative

This Annexure has been updated on 11-Apr-2023 in line with the lender-wise facility details as on 08-Apr-2023 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
The Rating Process
Rating Criteria for Cotton Textile Industry
CRISILs Criteria for rating short term debt
Understanding CRISILs Ratings and Rating Scales

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