Rating Rationale
August 11, 2020 | Mumbai
B. I. Fabrics
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.12 Crore
Long Term Rating CRISIL BBB-/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISILs rating on the long term bank facilities of B. I. Fabrics (BIF) continues to reflect the established market position and healthy financial risk profile marked by healthy networth and comfortable debt protection metrics. These strengths are partially offset by the exposure to intense competition and to volatility in raw material along with large working capital requirement.
 
The lockdown and other measures taken by various central and state governments towards containment of COVID-19 are expected to have a moderate impact on the business risk profile of BIF. The firm's operations have resumed from June 2020 albeit at considerably reduced scale with BIF currently executing pending orders. Cost rationalisation strategies deployed by the partners is expected to limit the extent of negative impact on the profit margins and net accruals in fiscal 2021.
 
CRISIL has also taken into cognizance, enhancement in the bank limits to support liquidity and moratorium being granted by the bankers for servicing of interest on working capital facilities as permitted by the Reserve Bank of India (RBI), which should contain the risk of default. CRISIL believes BIF should revive its operations over the next 2-3 months and although elongated should also witness steady payments from customers, over the medium term. The credit risk profile will continue to be supported by the firm's healthy financial risk profile and need based funding support from the partners.

Analytical Approach

For arriving at the rating, CRISIL has combined the business and financial risk profiles of B I Group of Industries (BIGI) and BIF. That is because these entities, together referred to as the B I group, operate in the same industry, under a common management, and have operational and financial linkages.

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: 
* Established market position
The group has strong vintage in processing saree blouse pieces and fabrics of ladies' dress materials (non-stitched). Over the years, it has established a brand and also a strong dealer network that has helped to steadily scale up the operations. Further, it benefits from the partners' experience of over four decades, their strong understanding of market dynamics, and healthy relations with customers and suppliers.
 
* Healthy financial risk profile
Financial risk profile is healthy with expected healthy networth of Rs 54 crore and total outside liabilities to adjusted networth  of 1.35 times as on March 31, 2020. Debt protection metrics is expected to remain healthy with interest coverage of 4 times respectively for fiscal 2020

Weakness:
* Exposure to intense competition and to volatility in raw material prices
Intense competition and minimal differentiation in end products may continue to constrain scalability, pricing power and profitability. Further, since cost of procuring the major raw material (grey fabric) accounts for a bulk of total production cost, even a slight variation in rates may drastically impact profitability.
 
* Large working capital requirement
Gross current assets were 180-200 days over the three fiscals ended March 31, 2020, driven by large inventory (over 90 days) and moderate receivables (more than 75 days). The working capital cycle is supported by the bank limit and creditors (42 days) extended by the suppliers.
Liquidity Adequate

Cash accruals at around Rs 3 crore in fiscal 2021 and Rs 6 crore in fiscal 2022 are expected to comfortably cover repayment obligations of around Rs 80 lakhs in fiscal 2021 and Rs 25 lakhs in fiscal 2022. Group has working capital limits of Rs 32.5 crore which is utllised to the tune of Rs 28.31 crore as on July 31, 2020. However, funding support from partners and unutilised bank lines will support liquidity over the medium term.

Outlook: Stable

CRISIL believes B I group will continue to benefit over the medium term from the extensive experience of its partners

Rating Sensitivity factors
Upward factor
* Improvement in cash accrual to over Rs 7 crore on sustained basis
* Sustained financial risk profile especially, capital structure along with improvement in liquidity position and moderation in bank limit utilization

Downward factor
* Decrease in cash accruals below Rs 3 crore on account of fall in revenue or operating profits
* Stretch in working capital cycle, larger-than-expected debt-funded capex or acquisition, or more-than-expected capital withdrawals, weakening the financial risk profile, particularly liquidity.
About the Firm

B. I. Group of Industries (BIGI) was started by members of Chopra and Shah family in 2003 and is a partnership firm started by Mr. Takhatmal Chopra and his brother Mr. Indramal Chopra. B. I. Group of Industries (BIGI) is engaged in manufacturing of Cotton, PC (polyester' cotton) and PV (polyester viscose) based fabrics for ladies' garments like dress material for salwar suits.

BIF is into processing of fabrics for blouse piece and petticoat, etc. and largely processes cotton-based fabrics. Both the entities have processing units at Rajasthan and are managed by same family. The units were set up as separate entities to avail prevalent tax benefits in the past.

Key Financial Indicators
As on/for the period ended March 31 Units 2019 2018
Operating income Rs crore 196.87 200.56
Reported profit after tax (PAT) Rs crore 6.22 3.12
PAT margins % 3.16 1.56
Adjusted debt/adjusted networth Times 0.75 0.80
Interest coverage Times 4.25 2.47

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Cr) Complexity Levels Rating Assigned with Outlook
NA Cash Credit NA NA NA 11 NA CRISIL BBB-/Stable
NA Term Loan NA NA March-21 1 NA CRISIL BBB-/Stable
 
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
B. I. Fabrics Full Common management and business, and operational and financial linkages
B. I. Group of Industries Full Common management and business, and operational and financial linkages
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  12.00  CRISIL BBB-/Stable  24-06-20  CRISIL BBB-/Stable  14-02-19  CRISIL BB+/Stable (Issuer Not Cooperating)*      14-11-17  CRISIL BB+/Stable (Issuer Not Cooperating)*  CRISIL BB+/Stable 
        20-02-20  CRISIL BBB-/Stable               
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
Cash Credit 11 CRISIL BBB-/Stable Cash Credit 11 CRISIL BBB-/Stable
Term Loan 1 CRISIL BBB-/Stable Term Loan 1 CRISIL BBB-/Stable
Total 12 -- Total 12 --
Links to related criteria
Assessing Information Adequacy Risk
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation

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