Rating Rationale
February 29, 2024 | Mumbai
Celebrity Fashions Limited
Ratings reaffirmed at 'CRISIL BB/Stable/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.100.05 Crore
Long Term RatingCRISIL BB/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
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 reaffirmed its 'CRISIL BB/Stable/CRISIL A4+’ ratings on the bank facilities of Celebrity Fashions Ltd (CFL).

 

The ratings continue to reflect the extensive experience of the promoters in the readymade garment export industry and established relationship with customers. These strengths are partially offset by average financial risk profile and exposure to intense competition.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: The promoters have more than two decades of experience in the readymade garment export industry; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business. The Company has achieved revenue of Rs.364.24 crore in fiscal 2023 and Rs.248.15 crore up to Q3 of Fiscal 2024. CRISIL Ratings believes that CFL will continue to benefit from the extensive experience of the promoters over the medium term.

 

  • Established relationship with customers: Through its long vintage and presence; CFL has been able to establish healthy relationship with its customers which include reputed readymade apparel corporates like Timberland, Northface, and LLBean etc resulting in regular orders from these customers. CRISIL Rating believes CFL shall continue to benefit from its established customer relationship over the medium term.

 

Weaknesses:

  • Average financial risk profile: Financial risk profile is marked by leveraged capital structure and moderate debt protection metrics. Capital structure is leveraged marked by gearing and Total Outside Liabilities/Tangible Networth (TOL/TNW) of 3.06 time and 5.78 time, respectively, as on 31st march 2023 and expected to improve to less than 2.5 times and 5 times, respectively, as on 31st March 2024. Debt protection metrics is moderate marked by interest coverage ratio (ICR) of 2.99 times and Net cash accruals to adjusted debt (NCAAD) of 0.18 time in fiscal 2023 and expected at over 2.5 times and 0.15 time, respectively, for fiscal 2024.

 

  • Exposure to intense competition: The readymade garment export industry comprises several unorganised players in India, Bangladesh and Southeast Asia. Thus, intense competition will continue to constrain scalability, pricing power and profitability of players such as CFL.

Liquidity: Adequate

Liquidity is adequate marked by moderate BLU and sufficient cushion between Net Cash Accruals (NCA) vs Repayment obligation (RO). Average month-end bank limit utilisation was moderate at 79% for the 12 months through January 2024. Cash accrual is expected in the range of Rs.12.5 to 15 crore per annum over the medium term against repayment obligation of Rs.3.43 crore per annum and preference share redemption of Rs.5 crore per annum over the medium term. Current ratio stood at 1.24 times as on March 31, 2023 and expected to be over 1.2 times as on March 31, 2024.

Outlook: Stable

CFL will continue to benefit from the extensive experience of its promoters and their established relationship with customers.

Rating Sensitivity factors

Upward factors

  • Revenue growth of more than 20% each fiscal while sustaining the operating margin above 7% leading to higher cash accruals.
  • Improvement in financial risk profile especially capital structure.

 

Downward factors

  • Significant decline in revenue or operating margin dropping below 4%.
  • Sizeable stretch in the working capital cycle or any large, debt-funded capital expenditure.
  • Materialization of contingent liabilities significantly deteriorating the financial risk profile, especially liquidity.

About the Company

Incorporated as a private-limited company in 1988 and reconstituted into a public-limited company in 2005, CFL manufactures and exports woven cotton garments for men and women. The company is listed on National Stock Exchange and Bombay Stock Exchange.

Key Financial Indicators

As on/for the period ended March 31

 Unit

2023

2022

Operating income

Rs.Crore

364.24

327.72

Reported profit after tax (PAT)

Rs.Crore

6.15

8.78

PAT margin

%

1.69

2.68

Adjusted debt/adjusted networth

Times

3.06

5.08

Interest coverage

Times

2.83

3.67

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.Cr)

Complexity

Levels

Rating assigned with

outlook

NA

Bank Guarantee

NA

NA

NA

0.25

NA

CRISIL A4+

NA

Export Packing Credit

NA

NA

NA

30

NA

CRISIL BB/Stable

NA

Foreign Bill Discounting

NA

NA

NA

21

NA

CRISIL BB/Stable

NA

Letter of Credit

NA

NA

NA

6.25

NA

CRISIL A4+

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

20.89

NA

CRISIL BB/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

2.5

NA

CRISIL BB/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

6.54

NA

CRISIL BB/Stable

NA

Term Loan

NA

NA

Mar-2025

12.62

NA

CRISIL BB/Stable

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 93.55 CRISIL BB/Stable   --   -- 08-12-22 CRISIL BB/Stable 06-10-21 CRISIL BB-/Stable CRISIL BB-/Stable / CRISIL A4+
      --   --   --   --   -- CRISIL BB-/Stable
      --   --   --   --   -- CRISIL B+ /Stable(Issuer Not Cooperating)*
Non-Fund Based Facilities ST 6.5 CRISIL A4+   --   -- 08-12-22 CRISIL A4+ 06-10-21 CRISIL A4+ 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 0.25 State Bank of India CRISIL A4+
Export Packing Credit 30 State Bank of India CRISIL BB/Stable
Foreign Bill Discounting 21 State Bank of India CRISIL BB/Stable
Letter of Credit 6.25 State Bank of India CRISIL A4+
Proposed Long Term Bank Loan Facility 20.89 Not Applicable CRISIL BB/Stable
Proposed Long Term Bank Loan Facility 2.5 Not Applicable CRISIL BB/Stable
Proposed Working Capital Facility 6.54 Not Applicable CRISIL BB/Stable
Term Loan 12.62 State Bank of India CRISIL BB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Cotton Textile Industry
CRISILs Criteria for rating short term debt

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