| Jawandsons Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+ / Stable / CRISIL A2 ' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale
The upgrade factors in group’s stable business risk profile which has remained buoyant over the years, especially amid covid related market disruptions. As a result of group’s established market presence characterized by diversified customer & product portfolio, promoters’ vintage in the industry etc. revenue is expected to improve to over Rs 450 crore in fy22 (Rs 360 crore in fy21) supported by Rs 395 crore of revenue reported during April-Jan. Further, increased focus on own manufacturing in JPPL along with benefits of economies of scale has additionally aided the operating profitability of the group, which is expected at around 17.5% in fy22 (15.7% during previous fiscal). Addition of knitting capacity shall further aid the business risk profile of the group over the medium term.
The rating also factors in group’s comfortable financial risk profile with estimated networth of over Rs 160 crore as at Mar 31, 2022. Though capital structure remains slightly leveraged with total outside liabilities to tangible networth (TOL/TNW) ratio of 1.4 times (estimated as at Nar 31, 2022), absence of sizeable debt funded capex along with steady accretion shall lead to moderation in leverage over the medium term. Liquidity remains comfortable too backed by sizeable net cash accruals vis a vis repayment, timely fund realisation from debtors and need based financial support from promoters.
The ratings continue to reflect the group’s established market position in the home décor industry and comfortable financial risk profile. These strengths are partially offset by working capital intensive operations and moderate scale of operations. |
Analytical approach CRISIL Ratings has combined the business and financial risk profiles of JSPL and Jindba Processors Pvt Ltd (JPPL), together referred to as the Jawandsons group, because the entities have strong operational and financial linkages, and common management.
Unsecured loan estimated at Rs 68 crore as on March 31, 2022, from the promoters has been treated as 75% equity and 25% debt. This is because the loan is subordinate to bank debt and will remain 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 and detailed description Strengths:
The group caters to a strong clientele, comprising reputed home décor brands such as Europe-based IKEA, Kmart Corporation, Zara, Kurlon, Victoria Fabrics, Nitori in Japan etc, though it derives a large portion of revenue from IKEA. The company initially focused on rugs, floor mats and coverings, but subsequently added home furnishing products such as soft toys, baby articles (baby covers, baby beds etc.) and furniture fabric to its portfolio. An in-house studio continuously develops new designs and patterns, in line with tastes and preferences of clients. Furthermore, backward integration into dyeing has improved the control over quality. This, along with the three decade-long experience of the promoters in the home textile business, will continue to aid the business risk profile.
Steady accretion to reserves over the years has resulted in healthy networth, estimated at over Rs 160 crore, as of Mar 31, 2022. Though increase in debt levels (for business expansion and incremental working capital requirement) has resulted in slightly high TOL/TNW at 1.4 times, it has improved consistently over the years and shall further improve over the medium term as well. Sustained increase in operating profitability has also resulted in healthy debt protection indicators with interest coverage and net cash accrual to debt ratio estimated at 8.7 times and 0.4 time, respectively, for fiscal 2022.
Weaknesses:
Gross current assets were 135-180 days over the last 3 fiscals through 2021 and is expected to be around 160 days in fiscal 2022, driven by receivables of 45-60 days. However, 10-15-year-long relationships with top clients and no instance of bad debts in the past mitigate this risk. Inventory was large at 90-120 days because of lead time involved in exports and sizeable stocks in warehouses to meet just-in-time requirements. Against these, credit from suppliers remains around 20-40 days.
Despite improvement over the past couple of fiscals, revenue shall remain moderate at around Rs 450 crore during fy22. The revenue profile is dominated by one customer, IKEA, which has contributed over 50% to the revenue of the group over past 2-3 fiscals through fy22. Though long-standing relation with IKEA partly mitigates the customer concentration risk, addition of new customer leading to lower dependence on IKEA alongside steady growth in revenue will remain a key monitorable over the medium term. |
Group is expected to generate cash accruals of Rs. 60-70 crore per annum as against annual repayment obligations of Rs. 12-15 crores over the medium term. Operations continue to remain working capital intensive and resultantly, average bank limit utilization stood high at around 89% for the 12 months ended Dec 2021. Further, promoters have also supported the liquidity over the past few years via unsecured loans, estimated at Rs 68 crore as of Mar 31, 2022. |
Outlook: Stable CRISIL Ratings believes the Jawandsons group will continue to benefit from its strong market position and relationships with key customers. |
Rating sensitivity factors Upward factors
Downward factors
|
About the group Jawandsons was set up as a partnership firm in 2000 and was reconstituted as a private limited company in February 2020 with the current name. Based in Ludhiana, Punjab, JSPL manufactures home furnishing and hosiery products, such as blankets and throws (mini blankets used during severe cold), for the export market.
Incorporated in March 2016, JPPL initially traded in yarn and fabrics. It then set up a dyeing unit, which became operational in November 2018. |
Key financial indicators (Consolidated)
|
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 instruments
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
|
This Annexure has been updated on 30-Mar-2022 in line with the lender-wise facility details as on 05-Aug-2021 received from the rated entity.
Criteria Details
|