Rating Rationale
November 29, 2022 | Mumbai
Garment Mantra Lifestyle Limited
Rating outlook revised to 'Stable'; Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.16.32 Crore
Long Term RatingCRISIL BB+/Stable (Outlook revised from 'Positive'; Rating 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 revised its outlook on the long-term bank facilities of Garment Mantra Lifestyle Limited (GMLL; part of Garment Mantra group) to ‘Stable’ from ‘Positive, while reaffirming the rating at ‘CRISIL BB+.

 

The outlook revision reflects weakened business risk marked by revenue of Rs.74.44 crore in H1 FY23 compared to Rs.204 crore in the previous fiscal while operating margin has reduced to 4.5% in H1 FY23 from around 9% in FY21. The same has happened due to increased cotton yarn and fabric prices and increased competition in the domestic market. Further, in the absence of any major debt funded capex plans, capital structure has remained moderate.

 

The rating continues to reflect extensive experience of GMLL’s promoters in the domestic ready-made garments (RMG) segment and the group’s comfortable financial risk profile. These strengths are partially offset by the modest scale of operations amidst intense competition and intense working capital management.

Analytical Approach

For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of GMLL and its majority-owned subsidiary, Jannat Fabrics and Apparels Pvt Ltd (JFAPL) and Twenty Twenty Trading LLP (TTTL). This is because the company, collectively referred to as the Garment Mantra group, operate in the same line of business and have significant financial linkages and are majorly owned by GMLL.

 

Please refer Annexure - List of a 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 in the domestic RMG segment: The decade-long presence of the promoters in the ready-made garments segment, has enabled them to understand the market dynamics and establish healthy relationships with customers, who are primarily wholesalers and retailers. The same reflects in moderate revenue growth with CAGR of around 21% in FY22.

 

  • Comfortable financial risk profile: Gearing and net worth was moderate at 1.21 times and Rs.35.9 crore as on March 31, 2022 respectively. The debt protection metrics were comfortable with the interest coverage ratio and net cash accrual to total debt (NCATD) at 2.55 times and 11% respectively for fiscal 2022. 

 

Weaknesses:

  • Modest scale of operations amidst intense competition: Intense competition and lower capacities in the textile industry may continue to keep the scale of operations subdued, as reflected in revenue of Rs 204.2 crore in fiscal 2022. Textile industry is marked by the presence of both organized and unorganized players resulting in intense competition.

 

  • Intense working capital management: Gross current assets is at 165 days as on March 31, 2022, on account of high inventory and receivables. Inventory is at 99 days while receivables was at 57 days as on March 31, 2022.

Liquidity: Adequate

Average month end bank limit utilization was moderate at 87% for the 12 months through July 2022. Net cash accrual is expected to be over Rs.3 crore per annum over the medium term against repayment obligation of around Rs.1.5 crore. Current ratio was adequate at 1.8 times as on March 31, 2022.

Outlook Stable

GMLL Group will continue to benefit from its promoters’ extensive industry experience and its established domestic presence

Rating Sensitivity factors

Upward factor

  • Strong revenue growth along with improved margin of more than 7%
  • Efficient working capital management along with sustained improvement in financial risk profile

 

Downward factor

  • Significant decline in revenue or profitability falling below 4% leading to lowe- than expected accruals
  • Stretch in working capital requirements or deterioration in financial risk profile especially liquidity

About the Group

GMLL was set up in 2011, by the promoter, Mr Prem Dhinanath Aggarwal and his family. The Tiruppur-based company manufactures T-shirts under the Hylex and Monk brands.

 

JFAPL was incorporated in 2013, promoted by Mr Prem Dhinanath Aggarwal and his family members. The Tirupur, Tamil Nadu-based company manufactures T-shirts, which it sells under the brands Helicon and Monk

Key Financial Indicators

As on / for the period ended March 31

 

2022

2021

Operating income

Rs crore

204.2

167.9

Reported profit after tax

Rs crore

3.6

8.2

PAT margins

%

1.8

4.9

Adjusted Debt/Adjusted Net worth

Times

1.21

1.27

Interest coverage

Times

2.55

4.87

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.crisil.com/complexity-levels. 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

Cash Credit

NA

NA

NA

16.32

NA

CRISIL BB+/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Jannat Fabrics And Apparels Private Limited

Full

Subsidiary

Twenty Twenty Trading LLP

Full

Subsidiary

Garment Mantra Lifestyle Limited

Full

Parent

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 16.32 CRISIL BB+/Stable   -- 02-09-21 CRISIL BB+/Positive 13-08-20 CRISIL BB/Stable 20-12-19 CRISIL BB /Stable(Issuer Not Cooperating)* CRISIL BB/Stable
      --   --   --   -- 03-01-19 CRISIL BB/Stable --
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
Cash Credit 16.32 Axis Bank Limited CRISIL BB+/Stable

This Annexure has been updated on 22-Dec-2022 in line with the lender-wise facility details as on 30-Nov-2022 received from the rated entity.

Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Bank Loan Ratings
CRISILs Approach to Financial Ratios
Rating Criteria for Cotton Textile Industry
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

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