| Kewal Kiran Clothing Limited | ||||
| Rating reaffirmed at 'CRISIL AA-/Stable' | ||||
| Rating Action | ||||
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| 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 reaffirmed its rating on the bank facilities of Kewal Kiran Clothing Limited (KKCL) to ‘CRISIL AA-/Stable’.
Gross margins have remained largely stable with the company being able to take calibrated price hikes as demand conditions improved post pandemic. The company has benefitted from better operating leverage and cost controls which has resulted in improvement of operating margins from 15.5% in fiscal 22 to 18.4% in fiscal 23 and further to 21.7% as of H1FY24. Going forward, margins are expected to sustain at healthy levels of 20-21% aided by stable gross margins and higher operating leverage.
The financial risk profile continues to remain strong with a healthy networth of Rs. 618 Crore (as on September 30, 2023), a net debt free balance sheet and strong debt protection metrics. Gearing as on 30th September 2023 is 0.08x times and is expected to sustain at healthy levels of below 0.10x over the medium term. Interest coverage and Net Cash Accruals to Total Debt (NCATD) stood at 43.5 and 3.07 times for H1FY24. KKCL’s liquidity position also remained strong with liquid surplus of over Rs 354 crore as on September 30, 2023. |
Key Rating Drivers & Detailed Description Strengths:
The brand portfolio of KKCL includes flagship brand Killer (accounting for over 60% of revenues) and other brands namely Lawman, Integriti, Easies and Desi Belle. Lawman and Integriti which cater to mid-range Men’s formals and clubwear bring in about 20-25% revenue combined. The balance is from Easies, Desi belle and other smaller brands.
Weaknesses:
The company has also foray into new brands namely Junior Killer and Desi Belle. However, Killer will remain a significant revenue contributor over the medium term due to its strong brand re-call.
Business is driven by fashion trends, and the target segment's aspirations are significantly influenced by peers, role models and the media. Therefore, their association with brands may change based on their perception of the value offered by the brands. Thus, manufacturers of branded apparel need to constantly innovate and adapt to the changing preferences of the target segment. KKCL, with its team of in-house designers who work on the upcoming season's collections, is likely to have the ability to adapt to changing trends. |
Liquidity: Strong The company had liquid investments (including cash and cash equivalents) of Rs 354crore as on September 30, 2023. Liquidity position is expected to remain strong over the medium term owing to healthy accruals and absence of any major capex plans. Furthermore, bank lines of Rs 145 crore are utilized at an average of 28% for the past 12 months ending August 2023, which coupled with annual accruals of over Rs. 100-120 crore per annum, will sufficiently cover the modest capex and incremental working capital requirement. |
Outlook: Stable CRISIL Ratings expects KKCL to sustain its credit risk profile, supported by its established brands and distribution network in the domestic apparel business, and its prudent financial risk profile. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company KKCL was established in 1980 as a partnership firm named Kewal Kiran and Co by Mr Kewalchand P Jain and Mr Hemant P Jain and was reconstituted as a public limited company with the present name in fiscal 2006. The company designs, manufactures and markets branded jeans, and a wide range of apparel products for men and women. Key brands include “Killer”, “Integritti”, “Lawman” and “Easies” for men and “Desi Belle” for women.
KKCL has 4 manufacturing units located across 3 states with a total area of ~2.87 lakh sq. ft., it has two garment stitching units in Mumbai, a washing unit at Vapi (Gujarat), and a finishing and packaging facility at Daman (Union Territory of Daman and Diu).
The company has 470 retail stores, of which 442 are owned and operated by franchisees. |
Key Financial Indicators*
*CRISIL Adjusted Numbers |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
@@Interchangeable with Rs 45 crore of bank overdraft facility, Rs 45 crore of export bill discounting, Rs 45 crore of export invoice financing, and Rs 45 crore of pre-shipment financing under export orders |
| 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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