Rating Rationale
September 30, 2022 | Mumbai
Infiiloom Textiles Private Limited
'CRISIL BBB/Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.135 Crore
Long Term RatingCRISIL BBB/Stable (Assigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed rationale

CRISIL Ratings has assigned its ‘CRISIL BBB/Stable’ rating to the long-term bank facilities of Infiiloom Textiles Private Limited (ITPL).

 

The rating reflects the strong operational and financial support ITPL receives from its parent, Infiiloom India Pvt Ltd (IIPL; ‘CRISIL BBB+/Stable/CRISIL A2’), the company’s experienced management team and healthy demand prospects for socks or legwear. These strengths are partly offset by exposure to project risks and average financial risk profile.

 

The parent has guaranteed the entire debt of ITPL. IIPL is a leading manufacturer and exporter of socks. The group, Infiiloom India reported operating income and operating margin of Rs 463.8 crore and 19.5%, respectively, in fiscal 2022, against Rs 326 crore and 19.4%, respectively, in fiscal 2021, driven by strong demand, addition of customers and better realisations.

 

The financial risk profile was comfortable, as reflected in healthy debt protection metrics and moderate capital structure. Gearing was 1.66 times as on March 31, 2022, against 1.4 times a year earlier. Interest coverage and net cash accrual to total debt ratios were adequate at 6.5 times and 0.23 time, respectively, in fiscal 2022.

Analytical approach

CRISIL Ratings has factored in the strong operational, financial and technological support ITPL receives from IIPL and has applied its parent notch-up framework. 

Key rating drivers and detailed description

Strengths:

  • Strong operational and financial support from the parent: ITPL is setting up a unit for manufacturing socks in Silvassa at cost of around Rs 200 crore. The parent has extended funding support for this project and a corporate guarantee for the entire debt. Furthermore, ITPL is in the same business as its parent. Established business of IIPL and its presence in key global markets, such as the US and Canada, shall enable ITPL to ramp up operations post commencement of commercial operations.

 

  • Extensive experience of the promoters, and healthy demand prospects: The promoters’ experience of two decades in the socks business, sound understanding of technology and market dynamics, and healthy relationships with suppliers and customers will continue to support the business.  

 

IIPL has successfully diversified its clientele in the past three years and added customers in the overseas market. Also, it supplies specialty socks to the government of India. Furthermore, it is one of the largest socks exporters in India and has an established track record in supplying legwear to reputed overseas brands. Increasing demand has necessitated the setting up of a new unit which has been undertaken in IIPL. The demand is driven by changes in sourcing strategies of overseas brands and longstanding presence of IIPL in the socks business.

 

Weaknesses:

  • Exposure to project risks: ITPL has undertaken a project at cost of Rs 200 crore, which will be funded through debt amounting to ~70% of the project cost. Expenditure of around 50% has been incurred and the debt has been already tied up. The project is expected to be commissioned before March 2023. Timely commissioning of project and ramp-up of operations remains critical and hence will be closely monitored.

 

  • Average financial risk profile: Of the project cost of around Rs 200 crore, Rs 135 crore will be funded through debt, leading to project gearing of around 2 times. Furthermore, cash accrual will be low in the initial phase, and the company will have to undertake working capital debt. Gearing is expected at around 2 times over the medium term. 

Liquidity: Adequate

Liquidity will remain adequate over the medium term driven by committed fund support from the parent and initial phase of operations. Expected cash accrual will just about cover scheduled debt obligation in the initial phase and the parent will provide financial support during exigencies. ITPL will avail working capital bank lines upon receiving commercial operations date (COD). Nonetheless, successful and significant ramp-up of operations and generation of adequate cash accrual will be key monitorables. 

Outlook: Stable

CRISIL Ratings believes ITPL will continue to benefit from the extensive experience of the promoters and the operational and financial support from the parent.

Rating sensitivity factors

Upward factors

  • Timely completion of project and successful ramp-up of operations, along with healthy operating margin, leading to higher cash accrual
  • Gearing less than 1.5 times owing to sizeable accretion or fresh equity infusion
  • Upward rating action on the parent

 

 Downward factors

  • Delayed project commissioning or lower-than-expected ramp-up leading to significantly lower cash accrual
  • Increase in working capital requirement or additional capital expenditure weakening the liquidity and financial risk profile (gearing over 2.7 times)
  • Downward rating action on the parent, or change in stance of support from the parent

About the company

ITPL, incorporated in December 2021, is a subsidiary of IIPL, which manufactures and exports socks. ITPL is setting up a manufacturing capacity in Silvassa. The company shall set up around ~900 new machines with fully automated operations. The new unit will be operational by March 2023.

About the group

IIPL, promoted by Mr C Y Pal and his son, Mr Rohit Pal, manufactures and exports socks. It has three facilities: two in Maharashtra (in Pune and Nashik) and one in Andhra Pradesh (Nellore, acquired in fiscal 2021 and expanded thereafter). The group is setting up a large facility in Silvassa, which will augment its manufacturing capacity by over 45%.

Key financial indicators

ITPL

For period ended March 31

Unit

2022

2021

Operating income

Rs crore

NA

NA

Reported profit after tax (PAT)

Rs crore

NA

NA

PAT margin

%

NA

NA

Adjusted debt / adjusted networth

Times

NA

NA

Interest coverage

Times

NA

NA

 

IIPL

For period ended March 31

Unit

2022*

2021

Operating income

Rs crore

463.83

326.4

Reported profit after tax (PAT)

Rs crore

40.78

26.2

PAT margin

%

8.79

7.88

Adjusted debt / adjusted networth

Times

1.66

1.43

Interest coverage

Times

6.42

5.14

*provisional

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)

ISIN

Name of

instrument

Date of

allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs crore)

Complexity

level

Rating assigned

with outlook

NA

Long Term Loan

NA

NA

Mar-28

135

NA

CRISIL BBB/Stable

 

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 135.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 50 Axis Bank Limited CRISIL BBB/Stable
Long Term Loan 40 ICICI Bank Limited CRISIL BBB/Stable
Long Term Loan 22.5 IndusInd Bank Limited CRISIL BBB/Stable
Long Term Loan 22.5 Hongkong & Shanghai Banking Co CRISIL BBB/Stable

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

Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings
The Rating Process
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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