| Ashnoor Textile Mills Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / CRISIL A3 '; outlook revised to 'Positive'; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term back facilities of Ashnoor Textile Mills Ltd (ATML) to ‘Positive’ from ‘Stable’ and reaffirmed the rating at ‘CRISIL BBB-/CRISIL A3’.
The revision in outlook reflects the expectation of significant increase in scale of operation and profitability in fiscal 2022 and sustenance of same over medium term. After a weaker Fiscal 2021 (wherein revenues moderated by around 14% to 118 crore due to lower volumes), ATML registered rapid growth in revenue in First half of Fiscal 2022 (to Rs. 112 crore already) on back of better volumes due to higher capacity levels as well as better realizations amid revival in demand post gradual opening up of economies as the restrictions imposed to curtail spread of covid-19 virus have been receding. The ratings also take cognizance of continual moderation in customer concentration risk (wherein around 90% of sales were with single customer till 2017 to top 5 customers contributing less than 60% of total sales in Fiscal 2021).
The profitability margins however remain susceptible to variation in prices of raw materials and ranged between 7% to 11.6% during last five Fiscals ending 2021. During Apr-Sep 2022, the company has achieved profitability margin of around 8.6%. Going forward, continual ability to pass on in inputs costs to customers and improved margins on sustainable basis would remain a key rating monitorable.
The ratings continue to reflect the established presence of the promoters in the terry towel industry and the company’s moderate financial risk profile. These strengths are partially offset by moderate scale and working capital-intensive operations. |
Analytical Approach Out of the total unsecured loans of Rs. 21.12 crore as on September 31, 2021 from promoters, CRISIL Ratings has considered Rs. 9.44 crore as Nor Debt Neither Equity (NDNE) and balance as debt. This is because these loans are interest-free and are expected to be retained and not withdrawn over medium term. |
Key Rating Drivers & Detailed Description Strengths:
The company is in expansion phase and has increased its capacity in Fiscal 2020 and 2021 and is expected to install further new 12 handlooms during current Fiscal 2022. As a result, the debt levels owing to expansion phase, have increased to Rs. 67 crore as on Sept 31, 2021 and is expected are peak towards year end, resulting in higher gearing levels, however is expected to improve hereon towards unity with accretion of profits to networth. Any delay in completion of expansion or higher than expected incremental debt levels leading to weaker financial risk profile would remain crucial from credit rating perspective.
Weaknesses:
Since sales during Fiscal 2021 were skewed towards year end (38% sales in Q4 2021 and 70% in H2), the working capital cycle actually stood improved. Similar level of GCA days are expected to be maintained over medium term. |
Liquidity: Adequate Bank limit utilisation was moderate at 92% on average during the 12 months through Sept 2021. The spike in utilization levels (as against 7-75% level during previous 12 months) was largely on account of ramp-up of operations and scale increasing while the sanctioned limits were at similar level. Net cash accrual are estimated at Rs 14 crore in fiscal 2022 and Rs. 16 crore in Fiscal 2023, against debt obligation of Rs 1.15 crore and Rs 3.42 crore, respectively. Current ratio remained moderate at 1.27 times as on March 31, 2021.
Incremental support from promoters may also be expected in case of any cash-flow mismatches as indicated by increase in the same by around Rs 7.5 crore during Apr-Sep 2021 to Rs. 21 crore as on Sep 30, 2021 (part of same expected to be repaid during current year itself). |
Outlook: Positive CRISIL Ratings believes ATML is likely to benefit out of its increased installed capacity and improve its business risk profile further while maintaining its financial and liquidity risk profile over medium term backed by promoters’ extensive experience. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company ATML, which was set up in 1984, manufactures and exports terry towels, mainly to the US. The company is listed on the Bombay Stock Exchange and National Stock Exchange. The company is promoted by Mr Sunil Gupta. |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
* Interchangeable with Export bill purchase |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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This Annexure has been updated on 01-Dec-2021 in line with the lender-wise facility details as on 01-Dec-2021 received from the rated entity.
& - Interchangeable with Export bill purchase
Criteria Details
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