| Creative Textile Mills Private Limited | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings ratings on the bank facilities of Creative Textile Mills Pvt Ltd (CTMPL, part of the Creative group)continue to reflect the extensive experience of the promoters and established market position in the textile industry, product differentiation and an established distribution channel, and a moderate capital structure. These strengths are partially offset by large working capital requirement, exposure to intense competition and average debt protection metrics |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Creative Garments Pvt Ltd, CTMPL, and Creative Portico Pvt Ltd (CPPL). That’s because all these companies, collectively referred to as the Creative group, have common promoters, are in the same line of business, and have significant operational, managerial and financial linkages. (Please refer table 1, which captures the list of entities considered and their analytical treatment of consolidation).
Unsecured loans of Rs 98.77 crore as on March 31, 2020, are treated as neither debt nor equity as they are likely to be sustained in business over the medium term.
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: Extensive experience of the promoters and established market position in the textile industry The promoters have an experiences of over three decades in the textile industry and have developed a strong relationship with customers and suppliers over the years. The group has a diversified revenue profile comprising readymade garments, fabrics, bedsheets and yarn. It has a presence in more than 20 countries and exports contribute around 70% of total revenue. The market position is also supported by established brands, Portico New York and Stellar Home. This has resulted in revenue growth to Rs 1080 crore in fiscal 2020 from Rs 613 crore in fiscal 2016; revenue is estimated at similar level in fiscal 2021.
Product differentiation and an established distribution channel: The group has a wide variety of premium bedsheets available in different colours and patterns, sold under its brands through distributors across India. It has a pan-India presence through 300-350 stores and multi-brand outlets. Moreover, products are sold through different web portals, which further enhances the market presence. The group has also tied-up with established designers and plans to venture into a new product line that will focus on youth and infants.
Moderate capital structure: Financial risk profile is marked by moderate capital structure as reflected in networth estimated to be at Rs.270.6 crore as on March 31, 2021. Despite the debt funded capex undertaken by the group during fiscal 2020, the gearing and total outside liabilities to adjusted networth (TOLANW) are moderate estimated at 1.33-1.35 times and 1.96-2 times, respectively, as on March 31, 2021. The gearing is estimated to remain at similar levels in absence of any major capex over the medium term.
Weaknesses: Working capital-intensive operations: Gross current assets (GCAs) are estimated to be high at 215 days as on March 31, 2021, on account of estimated receivables and inventory of 86 days and 99 days, respectively. That’s due to the long manufacturing process and large credit extended to customers. However, working capital requirement is partly supported by payables of 50-70 days, leading to moderate dependence on bank lines.
Exposure to intense competition: The textile industry is fragmented because of the presence of several unorganised players with small capacities. The entry barrier is low due to limited capital and technology requirements and little differentiation in end products. Thus, profitability remains susceptible to competitive pressures.
Average debt protection metrics: The interest coverage and net cash accrual to adjusted debt ratios were around 2.03 times and 0.02 time, respectively, during fiscal 2020, and are expected at similar levels for fiscal 2021. That’s on account of a range-bound operating margin (7.00-7.15% in the past three fiscals). Going forward, the debt protection metrics are expected to improve, yet remain average over the medium term. |
Liquidity: Adequate Creative Group has adequate liquidity driven by expected cash accruals of Rs.45-50 crores in fiscal 2022 and fiscal 2023, against term debt obligations of Rs. 20 crores and Rs. 40 crores, respectively. Cash and cash equivalents were Rs.20 Crores as on March 31, 2020. The group's fund based limits have been utilized to the tune of 70% on an average over the 12 months ended January 2021. CRISIL Ratings expects internal accruals and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believes the Creative group will continue to benefit over the medium term from the extensive experience of its promoters |
Rating Sensitivity factors Upward factors * Increase in revenues and operating margins of more than 8.5% leading to improved accruals * Improved working capital cycle, strengthening financial risk profile
Downward factors * Significant decline in revenues or operating margin (below 6%) resulting in lower net cash accruals * Elongation of gross current asset days above 300 days, or large debt funded capex impacting financial risk profile |
About the Group The Creative group, based in Mumbai, is promoted by Mr Vijay Agarwal and his sons, Mr Arunanshu Agarwal and Mr Vishwanshu Agarwal.
CGPL, incorporated in 1984, is the flagship company of the group and manufactures readymade garments, primarily for exports. The manufacturing facilities are in Daman, Bengaluru and Bhiwandi, Maharashtra.
CTMPL, earlier known as Creative Portico India Pvt Ltd, was incorporated in 1996. The company manufactures shirting fabrics and home textiles, and processes yarn. The manufacturing facilities are in Vapi, Gujarat.
CPPL was incorporated in 2008 by demerging the domestic home textiles business from CTMPL. The company manufactures bed sheets, duvet covers, comforters, quilts and other home textile products under the brands Portico New York and Stellar Home. The manufacturing facilities are in Daman |
Key financial indicators (consolidated)
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Status of non cooperation with previous CRA: CTMPL has not cooperated with Credit Analysis and Research Limited which has classified it as issuer not cooperative vide release dated May 7, 2020. The reason provided by Credit Analysis and Research Limited is non-furnishing of information for monitoring of ratings |
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)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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