Rating Rationale
January 06, 2021 | Mumbai
Polo Queen Industrial and Fintech Limited
Ratings reaffirmed at 'CRISIL BB- / Stable / CRISIL A4+ '; rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.8.75 Crore (Enhanced from Rs.7.75 Crore)
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BB-/Stable/CRISIL A4+' ratings on bank facilities of Polo Queen Industrial and Fintech Limited (PQIFL).
 
The ratings continue to reflect extensive experience of promoters in the trading business, their fund support and moderate capital structure. These rating strengths are, however, partially constrained by modest scale of operations in a competitive industry and weak debt protection metrics.

Analytical Approach

Unsecured loans from promoters of Rs 7.7 Cr have been treated as neither debt neither equity as it expected to remain in the company.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoter: The promoters have an experience of over 40 years in the trading industry. This has given them an understanding of the dynamics of the market, and enabled them to establish relationships with suppliers and customers. The company has a diversified product portfolio comprising of trading in fabrics, minerals and chemicals as well as fast moving consumer goods.

 

  • Moderate capital structure: The total outside liabilities to adjusted networth ratio was moderate at 2.64 times as on March 31, 2020, despite modest networth, due to fund support from promoters leading low dependence on external funds.

 

Weaknesses:

  • Modest scale of operations in a competitive trading industry:

Scale of operation is modest as reflected in the revenue of Rs 17.9 crore for fiscal 2020 (decreased from Rs 51.8 crore in fiscal 2019) which limits its bargaining power with suppliers and customers. It faces intense competition from other small and medium players in the intensely competitive trading industry.

 

  • Weak debt protection metrics:

Interest coverage is weak at 0.83 time for fiscal 2020 due to low profitability. It is expected to remain at similar levels over the medium term.

Liquidity: Stretched

PGIFL has stretched liquidity driven by expected cash accruals of Rs. 0.1-0.4 crore per annum in fiscal 2021 and fiscal 2022 and low cash and bank balance of Rs. 0.33 crores as on March 31, 2020. It has no repayment obligations in the medium term. Its fund-based limits of Rs. 7 crore was 60% utilized on an average over the past 12 months ended September 2020.

Outlook Stable

CRISIL believes PQIFL will continue to benefit from extensive industry experience of its promoters.

Rating Sensitivity factors

Upward factors

  • Significant improvement in scale of operation and sustenance of operating margin leading to cash accruals of more than Rs 1.5 crore
  • Improvement in working capital cycle and better debt protection metrics

 

Downward factors

  • Deterioration in scale of operations and profitability leading to lower cash accrual
  • Stretch in working capital requirement or large debt funded capital expenditure weakening TOLANW above 3.5 times

About the Company

PQIFL, incorporated in 1984 by Sanghai family, is engaged into trading of fabric, FMCG products and minerals and chemicals and is based out of Mumbai, Maharashtra. It sells the FMCG products under its own brand 'Polo Queen's in personal care, home care, kitchen care and fabric care segments.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs crore

17.94

51.76

Profit after tax (PAT)

Rs Crore

(0.26)

0.62

PAT margin

%

(1.5)

1.2

Adjusted debt/adjusted networth

Times

1.3

1.4

Interest coverage

Times

0.83

1.64

 

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 crore)

Complexity level

Rating assigned with outlook

NA

Bank Guarantee

NA

NA

NA

0.75

NA

CRISIL A4+

NA

Cash Credit

NA

NA

NA

5

NA

CRISIL BB-/Stable

NA

Government Bill Purchase

NA

NA

NA

2

NA

CRISIL BB-/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

1

NA

CRISIL BB-/Stable

 

Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019 2018 Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 8.0 CRISIL BB-/Stable 31-10-20 CRISIL BB-/Stable 24-10-19 CRISIL BB-/Stable 31-12-18 CRISIL BB/Stable --
Non-Fund Based Facilities ST 0.75 CRISIL A4+ 31-10-20 CRISIL A4+ 24-10-19 CRISIL A4+ 31-12-18 CRISIL A4+ --
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 0.75 CRISIL A4+ Bank Guarantee 0.75 CRISIL A4+
Cash Credit 5 CRISIL BB-/Stable Cash Credit 5 CRISIL BB-/Stable
Government Bill Purchase 2 CRISIL BB-/Stable Government Bill Purchase 2 CRISIL BB-/Stable
Proposed Working Capital Facility 1 CRISIL BB-/Stable - - -
Total 8.75 - Total 7.75 -
Links to related criteria
Criteria for rating trading companies
Rating Criteria for Cotton Textile Industry
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Bank Loan Ratings

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