| Durian Industries Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on bank facilities of Durian Industries Limited (DIL, part of the Durian group) at 'CRISIL BBB/Stable/CRISIL A3+'.
The ratings continue to reflect the extensive experience of the Durian group's promoters, established position in the furniture manufacturing and retailing business, and healthy financial risk profile. These strengths are partially offset by exposure to intense competition and a modest operating margin as well as high working capital requirements. |
Analytical Approach For arriving at the ratings, CRISIL Ratings had combined the business and financial risk profiles of Palghar Plywood Products Private Limited (PPPPL), Maple Mouldings Private Limited (MMPL), Cedar Decor Private Limited (CDPL), and DIL. That's because these entities, collectively referred to as the Durian group, have common promoters, are in the same line of business, and have significant operational, managerial and financial linkages.
Unsecured loans from promoters of Rs 10.6 crore, as on March 31, 2021, have been treated as neither debt nor equity as these are expected to be retained in the 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:
The Durian group is one of the major branded players in the furniture industry. It has a diversified revenue profile including manufacturing of home furniture, office furniture, modular furniture, decorative veneer, and laminates; and trading in timber products. It also provides interior (furniture-related) solutions to corporate entities and undertakes turnkey projects. The group operates through outlets (currently 50 showrooms) located across India. Its longstanding presence have enabled it to build a strong reputation in this business, and also establish healthy relationships with clients, suppliers, and sub-contractors. Moreover, the group's association with overseas suppliers helps source a range of furniture (economical to high-end) as per the client's requirement. Durian group will continue to benefit from its established market position as well as extensive experience of promoters.
Group’s capital structure is marked by a strong networth of Rs 121 crore and comfortable gearing and total outside liabilities to adjusted networth ratios of 0.61 time and 1.28 time, respectively, as on March 31, 2021 (improved from 0.67 times and 1.41 times, respectively, a year ago). The debt protection metrics were adequate marked by interest cover of 2.96 times and net cash accruals to adjusted debt ratio of 0.21 times in fiscal 2021. Group’s financial risk profile is expected to remain healthy over the medium term supported by steady accretion to reserves, controlled reliance on external debt and given no major debt-funded capex plans over the medium term.
Weaknesses:
The furniture market in India is dominated by unorganised players. In the organised segment, there are few large players that have established retail networks. The Durian group is also expected to face intense competition from large international players entering the retail furniture market in India. The technological abilities, established brand, and financial resources of such players are likely to intensify competition among organised Indian players further. The intense competition has led to the group's operating margin to remain rangebound at 6.5-8.5% over the past four fiscals through 2021.
The group’s operations are working capital intensive as reflected in gross current assets (GCAs) of 200-26 days for past three fiscals ended March 2021, backed by inventory of 120-150 days and receivables of 80-100 days. The inventory levels are high due to business needs as it has to offer various furniture models/designs to its customers. While, debtor cycle is high as it offers large credit to its customers of around 2.5-3 months. The working capital requirement is partially funded by creditors to 70-100 days. Group’s operations are expected to remain working capital intensive over the medium term. |
Liquidity: Adequate Cash accrual is expected to be more than Rs 16 crore in fiscal 2022 and fiscal 2023 against moderate repayment obligations of Rs 2.4 crore and Rs 4.6 crore, respectively. The group’s bank limits of Rs 100 crore were 67% utilized on average over the 12 months through October 2021. Cash and cash equivalents were of Rs 11.5 crore as on March 31, 2021. Absence of any major capex plans and unsecured loans from promoters supports liquidity. CRISIL Ratings believes internal cash accrual, unutilized bank lines and cash and cash equivalents will be sufficient against repayment obligations and incremental working capital requirements. |
Outlook: Stable CRISIL believes the Durian group will continue to benefit over the medium term from its established position and brand in the furniture manufacturing and retailing business. |
Rating Sensitivity factors Upward factors
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About the Group The Durian group was set up in 1981 by the late Mr Lakshmi Narayan Dokania and his sons. It manufactures and retails furniture (wood and medium-density fibre boards), laminates, plywood, decorative plywood, decorative veneer, and doors; and also trades in wood and related items. The group has its manufacturing facilities in Palghar and Wada (Maharashtra) and Ahmedabad (Gujarat).
Set up in 1981, DIL is the flagship company of the group. The other entities were set up subsequently: PPPPL, set up in 1982, manufactures plywood and black boards. MMPL, established in 1987, primarily deals in doors, while CDPL, incorporated in 2000, mainly deals in laminates. |
Key Financial Indicators - Consolidated
*Provisional numbers |
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)
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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 Bank Lenders & Facilities | |||||||||||||||
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Criteria Details
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