Rating Rationale
September 16, 2020 | Mumbai
Ginza Industries Ltd.
Ratings downgraded to 'CRISIL BB+/Stable/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities Rated Rs.200 Crore
Long Term Rating CRISIL BB+/Stable (Downgraded from 'CRISIL BBB/Negative')
Short Term Rating CRISIL A4+ (Downgraded from 'CRISIL A3+')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its ratings on the bank facilities of Ginza Industries Ltd. (Ginza) to 'CRISIL BB+/Stable/CRISIL A4+' from 'CRISIL BBB/Negative/CRISIL A3+'
 
The downgrade factors in delay in sanctioning of additional Covid-19 limits from banks, leading to a further stretch on liquidity profile of the company. It also factors in bulk repayment obligations to be repaid post the end of moratorium for the remaining of fiscal 2021, which are entirely dependent upon timely realization from the counterparties. Moreover, the continued high utilization of bank lines have resulted in stretched liquidity.

Further, net cash accrual for fiscal 2021 are also expected to remain subdued amidst disruptions in overall economic activity driven by the Covid-19 pandemic in India as well as other global markets. 
 
Hence, improvement in liquidity, with steady flow of orders and timely realisation of debtors, coupled with sanction of Covid-emergency bank lines will be key monitorable over the near term.
 
The ratings continue to reflect an established position as one of the largest organised warp-knit fabric manufacturers in India, supported by a strong clientele, an established distribution network, and fully integrated operations. These strengths are partially offset by large working capital requirement, exposure to intense competition especially from the unorganised market, susceptibility to changes in fashion trends and consumer spending patterns, and average financial risk profile.

Analytical Approach

Unsecured loans have been treated as debt.

Key Rating Drivers & Detailed Description
Strengths: 
* Established market position: The company is one of the largest player in the warp-knit industry in India with the biggest capacity and a presence in specialised products. The company claims to command over 60 per cent of market share in India in key apparel components including raschel knitted fabrics, tricot fabric and laces. Over the years the company established the 'Ginza' brand in the warp knit industry, which results in continuous orders from domestic as well overseas clients.
 
* Strong clientele and established distribution network: Around 20% of revenue is derived from exports to 15 countries. In India, sales are to large intimate apparel manufacturers and various readymade garment producers through more than 1,500 dealers, including large players such as Reliance Retail Ltd, Aditya Birla Fashion and Retail Ltd, and Shoppers Stop Ltd.
 
* Fully integrated operations: A presence across the value chain with facilities for yarn processing, weaving and knitting, dyeing, printing and embroidery, along with garment manufacturing, results in quality and cost-effective products, thus supporting the operating margin.
 
Weaknesses:
* Working capital-intensive operations: Gross current assets were high at 247 days as on March 31, 2020. That's because of large inventory of 135 days as the company operates across the value chain and has several products, and high debtors (of 98 days) as credit of 75-90 days is offered to customers. The inventory levels further increased in fiscal 2020, due to lockdown imposed in the last 15 days. Working capital requirement is likely to remain at a similar level over the medium term on account of high year-end sales and procurement, which leads to high debtors and inventory.
 
* Exposure to intense industry competition: Unbranded and unorganised regional players account for two-thirds of the lingerie industry in India, while the remaining is accounted for by a few big organised and branded players. The warp-knit fabric industry is also fragmented due to the presence of a large number of unorganised players, leading to intense competition. This restricts pricing flexibility and bargaining power with customers and suppliers. Moreover, the business risk profile is likely to remain constrained due to disruption in demand and orders from customers amid the pandemic.
 
* Average financial risk profile: The networth was Rs 119 crore, and the total outside liabilities to adjusted networth (TOLANW) ratio and gearing 2.22 times at 1.55 times, respectively, as on March 31, 2020. This was on account of high debt and lower accretion reserves with the decline in profitability in fiscal 2020. The debt protection metrics were moderate with interest coverage ratio of 1.69 times and net cash accrual to adjusted debt ratio of 0.09 time for fiscal 2020. With no major debt-funded capital expenditure plans, the overall financial risk profile is expected to be moderate over the medium term.
Liquidity Stretched

Cash accrual is expected at Rs 15.0-15.5 crore in fiscal 2021 and Rs 20-22 crore in fiscal 2022, against debt repayment of Rs 13.55 crore and Rs 19.77 crore per fiscal, respectively. Average utilisation of the bank limit of Rs 110 crore was 95-96% during the 12 months through June 2020. Cash and equivalents of Rs 4.9 crore as on March 31, 2020, provide some cushion to liquidity. The company has availed moratorium on all bank limits till August 2020.

Outlook: Stable

CRISIL believes Ginza will continue to benefit from its promoter's extensive experienced and established market position.

Rating Sensitivity factors
Upward factors:
* Sustained increase in revenue and profitability, leading to higher cash accruals of more than Rs. 20 crore and hence improved cushion in repayment obligations
* Improvement in the working capital cycle with considerable reduction in inventory, leading to lower dependence on bank lines
 
Downward factors:
* Stretch in debtors or delay sanctioning of additional limits, leading to further stretch on liquidity and reduces cushion for repayment below 1 time
* Higher than expected decline in revenues and profitability, further impacting debt protection metrics
About the Company

Ginza, incorporated in 1986, is currently owned and managed by members of the Sethia family. The company was originally set up to manufacture warp and raschel knitted fabric, but thereafter progressively integrated its line of business both forward and backward to include yarn manufacturing, textile processing, intimate apparel manufacturing, elastic tape and eye and hook manufacturing, and garmenting. The company also manufactures and markets garments and inner wear for women under the SOIE brand. It is based in Mumbai and has manufacturing facilities in Gujarat and Maharashtra.

Key Financial Indicators
As on / for the period ended March 31   2020* 2019
Operating income Rs crore 321.62 340.06
Reported profit after tax (PAT) Rs crore 2.10 8.60
PAT margin % 0.7 2.5
Adjusted debt / Adjusted networth Times 1.55 1.65
Interest coverage Times 1.69 2.08
*Provisional data

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 Level Rating Assigned  with Outlook
NA Bank Guarantee NA NA NA 1 NA CRISIL A4+
NA Cash Credit NA NA NA 110 NA CRISIL BB+/Stable
NA Corporate Loan NA NA 31-Mar-25 13.5 NA CRISIL BB+/Stable
NA Letter of Credit NA NA NA 12.5 NA CRISIL A4+
NA Long Term Loan NA NA 15-Jul-22 6.3 NA CRISIL BB+/Stable
NA Non-Fund Based Limit NA NA NA 5 NA CRISIL A4+
NA Term Loan NA NA 15-Nov-26 51.7 NA CRISIL BB+/Stable
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  181.50  CRISIL BB+/Stable  21-07-20  CRISIL BBB/Negative  10-04-19  CRISIL BBB+/Stable  06-07-18  CRISIL BBB+/Stable  13-12-17  CRISIL A-/Negative  CRISIL A-/Stable/ CRISIL A2+ 
                    08-06-17  CRISIL A-/Negative   
Non Fund-based Bank Facilities  LT/ST  18.50  CRISIL A4+  21-07-20  CRISIL A3+  10-04-19  CRISIL A2  06-07-18  CRISIL A2  13-12-17  CRISIL A2+  CRISIL A2+ 
                    08-06-17  CRISIL A-/Negative/ CRISIL A2+   
All amounts are in Rs.Cr.
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 1 CRISIL A4+ Bank Guarantee 1 CRISIL A3+
Cash Credit 110 CRISIL BB+/Stable Cash Credit 110 CRISIL BBB/Negative
Corporate Loan 13.5 CRISIL BB+/Stable Corporate Loan 13.5 CRISIL BBB/Negative
Letter of Credit 12.5 CRISIL A4+ Letter of Credit 12.5 CRISIL A3+
Long Term Loan 6.3 CRISIL BB+/Stable Long Term Loan 6.3 CRISIL BBB/Negative
Non-Fund Based Limit 5 CRISIL A4+ Non-Fund Based Limit 5 CRISIL A3+
Term Loan 51.7 CRISIL BB+/Stable Term Loan 51.7 CRISIL BBB/Negative
Total 200 -- Total 200 --
Links to related criteria
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 rating short term debt
Understanding CRISILs Ratings and Rating Scales

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Rahul Guha
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8320
rahul.guha@crisil.com

Ankita Gupta
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8104
ankita.gupta@crisil.com

Swapnali Mane
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Swapnali.Mane@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL