Rating Rationale
February 28, 2018 | Mumbai
Page Industries Limited
Rating Reaffirmed; CP Withdrawn
Rating Action
Total Bank Loan Facilities Rated Rs.40 Crore (Reduced from Rs.230 Crore)
Long Term Rating CRISIL AA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Withdrawal)
Rs.15 Crore Commercial Paper CRISIL A1+ (Withdrawal)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the Rs 40 crore cash credit facility of Page Industries Ltd (PIL) at 'CRISIL AA/Stable'. CRISIL has withdrawn its ratings on other long and short-term bank facilities based on the company's request. CRISIL has also withdrawn its rating on PIL's commercial paper programme. The rating action is in line with CRISIL's policy on withdrawal of ratings.
The ratings continue to reflect an established market position in the domestic premium innerwear segment and a strong financial risk profile because of conservative gearing and strong debt protection metrics. These rating strengths are partially offset by sizeable annual dividend payouts and exposure to intensifying competition.

Analytical Approach

For arriving at its ratings, CRISIL has taken a standalone view of PIL.

Key Rating Drivers & Detailed Description
* Established market position in the premium innerwear market in India: PIL is the sole licensee of the globally established Jockey brand and has capitalised on the brand equity in the rapidly transforming innerwear market. It is currently among the leading players in the domestic market with a share of 21% and 12% in the men's and women's segments, respectively. A strong distribution network and healthy brand recall for the Jockey brand in the innerwear market have contributed to the steady market share, robust revenue growth, and a stable operating margin. Revenue has grown at a robust compound annual growth rate of 25% over the five years through 2017. Moreover, an industry-leading operating margin of around 20% has been maintained despite the volatility in cotton prices and competition from new entrants.
* Strong financial risk profile: The gearing is conservative and debt protection metrics strong. The gearing declined to 0.13 time as on March 31, 2017, from 0.41 time as on March 31, 2015. The interest coverage and net cash accrual to total debt ratios were 21.92 times and 1.85 times, respectively, for fiscal 2017. Furthermore, the financial risk profile benefits from prudent management of debt, despite the substantial growth in scale of operations. Debt levels may increase over the medium term due to capacity increase being planned by the company. However, debt protection metrics are likely to remain comfortable, supported by steady cash flow from operations.
* Sizeable dividend payout, restricting accumulation of cash reserves: The annual dividend payout ratio has ranged around 50% for the last 4 years. Sizeable dividend payout has constrained the improvement in the networth and build-up of cash surplus, despite healthy cash generation. The company will continue to pay sizeable dividends, which will constrain its accretion to networth and accumulation of liquid reserves (cash and bank balances).
* Exposure to intensifying competition in the innerwear industry: India's innerwear market is dominated by the unorganised sector, despite the robust market potential for branded innerwear, leading to intense competition. Competition could also increase with the advent of established foreign brands through the franchisee route, strong domestic readymade garment manufacturers venturing into innerwear segments, and domestic players spending heavily on brand-building and product-positioning. Intensifying competition could hence result in market challenges for players in the industry, including PIL.
Outlook: Stable

CRISIL expects PIL's business risk profile to remain healthy supported by sound demand prospects for premium innerwear, a strong and established position in the domestic innerwear segment, and healthy operating efficiency. The financial risk profile too will continue to be strong, supported by healthy gearing, due to the conservative stance of the promoters on gearing, and debt protection metrics. Continued association with the US-based Jockey International Inc and any change in the royalty payments for the Jockey brand will continue to be rating sensitivity factors.
Upside Scenario:
* Significant growth in scale and geographical reach of operations leveraging on the strong relationship with the principal, Jockey International Inc, while sustaining the healthy operating profitability and financial risk profile.
Downside scenario:
* Sharp deterioration in the business performance impacting the strong annual cash generation
* Moderation in the currently strong key credit metrics due to sizeable debt addition for capital spending or acquisitions
* Higher-than-anticipated dividend payouts, capital reduction, or share buy-back

About the Company

Established in 1994 by the Genomal family, PIL is the exclusive licensee of Jockey International Inc, USA, in India, the UAE, Sri Lanka, Republic of Maldives, Bangladesh, and Nepal, for manufacture and distribution of the Jockey brand of innerwear and leisurewear for men and women. The company currently has a total manufacturing capacity of 16 crore pieces per annum and has proposed to scale it up over the medium term. It distributes Jockey products through 23,000 retail outlets in 1200 cities and towns across India through a mix of retail format stores. In fiscal 2012, PIL commenced distribution of the Speedo brand in India as an exclusive licensee of Speedo International, an Australian manufacturer and distributor of swimwear.
For the first 9 months of fiscal 2018, PIL reported a profit after tax (PAT) of Rs 253 crore (Rs. 199 crore for the corresponding period last year) on revenues of Rs 1958 crore (Rs 1647 crore for the corresponding period last year).

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs. Cr. 2,132 1,802
Profit After Tax Rs. Cr. 266 233
PAT margins % 12.5 12.9
Adjusted Debt/Adjusted Net worth Times 0.13 0.19
Interest coverage Times 21.92 20.71

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 Cr.)
Rating Assigned
with Outlook
NA Cash Credit NA NA NA 130 Withdrawal
NA Cash Credit NA NA NA 40 CRISIL AA/Stable
NA Letter of credit NA NA NA 60 Withdrawal
NA Commercial Paper NA NA 7-365 days 15 Withdrawal
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  15  Withdrawal    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Fund-based Bank Facilities  LT/ST  40  CRISIL AA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AA/Stable 
Non Fund-based Bank Facilities  LT/ST  60  Withdrawal    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 40 CRISIL AA/Stable Cash Credit 170 CRISIL AA/Stable
Cash Credit 130 Withdrawal Letter of Credit 60 CRISIL A1+
Letter of Credit 60 Withdrawal -- 0 --
Total 230 -- Total 230 --
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
Rating Criteria for Cotton Textile Industry
CRISILs Criteria for rating short term debt

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