Rating Rationale
June 25, 2021 | Mumbai
Angel Fibers Limited
Long-term rating upgraded to 'CRISIL BB+/Stable'; short-term rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.57 Crore
Long Term RatingCRISIL BB+/Stable (Upgraded from 'CRISIL BB-/Stable')
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long-term bank facilities of Angel Fibers Ltd (AFL) to 'CRISIL BB+/Stable’ from 'CRISIL BB-/Stable' and reaffirmed its ‘CRISIL A4+' rating on the short-term facility.

 

The upgrade reflects the sustained improvement in the operating performance of AFL as indicated by revenue of Rs 139 crore in fiscal 2021 despite the impact of the Covid-19 pandemic. Operating margin improved to around 16% from 4.5% in fiscal 2020 on account of increase in the spread between the prices of cotton yarn and bales. The margin is expected at 12-13% over the medium term. Healthy accrual has shored up the company’s financial risk profile and liquidity. The improvement is expected to sustain over the medium term with no major debt-funded capital expenditure and controlled working capital cycle. Timely fund infusion by the promoters continues to support liquidity.

 

The ratings continue to reflect the extensive experience of the promoters of AFL in the cotton yarn segment, and the proximity of the unit to the cotton-growing belt of Gujarat. These strengths are partially offset by average financial risk profile and modest scale of operations.

Analytical Approach

Unsecured loans from the promoters have been treated as neither debt nor equity as they are subordinated to bank debt and expected to remain in the business over the medium term.

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.

 

  • Proximity to cotton-growing belts: AFL is based in Haripar, Jamnagar, which is a part of the cotton-growing belt in Gujarat. The company procures cotton bales largely from local ginning mills. This ensures continuous supply of raw material and reduces logistic cost, thus making operations more cost effective. This is reflected in healthy operating margin of 16% in fiscal 2021. AFL will continue to benefit from its advantageous location and will likely report operating margin of 12-13% over the medium term.

 

Weaknesses

  • Average financial risk profile: The financial risk profile is constrained by high total outside liabilities to adjusted networth ratio and gearing of 2.78 times and 2.47 times, respectively, as on March 31, 2021. Though the ratios are likely to improve over the medium term, aided by term debt repayment and reduced reliance on bank limit, they will remain under pressure.

 

  • Modest scale of operations: The scale will remain modest as AFL is not planning any expansion and operates at around 80% of capacity.

Liquidity Adequate

Bank limit utilisation was moderate at 80% on average over the four months through April 2021. Cash accrual is expected at Rs 15-16 crore against term debt obligation of Rs 10.9 crore over the medium term, and the surplus will cushion liquidity. Current ratio was moderate at 1.13 times as on March 31, 2021. The promoters are likely to extend support in the form of equity and unsecured loans to meet working capital requirement and debt obligation.

Outlook: Stable

CRISIL Ratings believes AFL will continue to benefit from the experience of its promoters in the textile spinning industry and their established relationships with customers.

Rating Sensitivity factors

Upward factors

  • Cushion of over 2 times between net cash accrual and debt obligation
  • Sustained revenue and operating profitability

Downward factors

  • Stretched working capital cycle with gross current assets exceeding 150 days
  • Increase in debt due to capital expansion

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

As on/for the period ended March 31

Unit

2021

2020

Operating income

Rs.Crore

139.27

147.01

Reported profit after tax

Rs.Crore

4.93

-15.31

PAT margin

%

4.98

-9.96

Adjusted debt/adjusted networth

Times

2.47

4.30

Interest coverage

Times

2.70

0.70

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity level

Rating assigned with outlook

NA

Cash Credit

NA

NA

NA

12

NA

CRISIL BB+/Stable

NA

Long Term Loan

NA

NA

Mar-2027

35.1

NA

CRISIL BB+/Stable

NA

Term Loan

NA

NA

Mar-2027

7.4

NA

CRISIL BB+/Stable

NA

Bank Guarantee

NA

NA

NA

2.5

NA

CRISIL A4+

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 54.5 CRISIL BB+/Stable 28-01-21 CRISIL BB-/Stable   -- 20-11-19 CRISIL D (Issuer Not Cooperating)* 30-01-18 CRISIL B- /Stable(Issuer Not Cooperating)* CRISIL B-/Stable
      --   --   -- 13-03-19 CRISIL B- /Stable(Issuer Not Cooperating)*   -- --
Non-Fund Based Facilities ST 2.5 CRISIL A4+ 28-01-21 CRISIL A4+   -- 20-11-19 CRISIL D (Issuer Not Cooperating)* 30-01-18 CRISIL A4 (Issuer Not Cooperating)* CRISIL A4
      --   --   -- 13-03-19 CRISIL A4 (Issuer Not Cooperating)*   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 2.5 CRISIL A4+ Bank Guarantee 2.5 CRISIL A4+
Cash Credit 12 CRISIL BB+/Stable Cash Credit 12 CRISIL BB-/Stable
Long Term Loan 35.1 CRISIL BB+/Stable Long Term Loan 35.1 CRISIL BB-/Stable
Term Loan 7.4 CRISIL BB+/Stable Term Loan 7.4 CRISIL BB-/Stable
Total 57 - Total 57 -
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
CRISILs Bank Loan Ratings
Understanding CRISILs Ratings and Rating Scales
The Rating Process

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