| Poppys Knitwear Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB-/Stable/CRISIL A3' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its ratings on bank facilities of Poppys Knitwear Private Limited (PKPL) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BB+/Stable/CRISIL A4+’.
The upgrade reflects sustained improvement in PKPL’s credit risk profile supported by healthy operating performance and financial risk profiles will be sustained over the medium term. Steady growth in revenue at a CAGR of more than 12% in past 3 years ended fiscal 2022. Growth in revenue is driven by increased demand from the existing clientele. The financial risk profile is improved with healthy capital structure, debt protection metrics and liquidity. It is expected to improve on account of no debt funded CAPEX and steady accretion to reserves. The rating continues to reflect the extensive experience of PKPL’s promoter also.
The ratings continue to reflect the extensive experience of the company's promoters in the textile industry, established customer base and average financial risk profile. The above strengths are partly offset by customer concentration in PKPL's revenue and susceptibility of operating profitability to change in material prices and forex rates |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of promoters in textiles industry and established customer base: PKPL's business risk profile benefits from its promoters' extensive experience of four decades. Also, PKPL's promoters have established relationships with key customers and have been associated with these players for more than a decade. The company has successfully met its customers' stringent quality requirements and delivery schedules over the past few years, which has enabled it to obtain increasing orders from them.
Average financial risk profile: Gearing has improved over the last 2 years to 1.66 times as on March 31, 2022 (E) and is expected to improve further over the medium term in the absence of large debt-funded capital expenditure. Debt protection metrics remain average marked by interest coverage and net cash accrual to adjusted debt is expected to be of 3.25 times and 0.13 time in fiscal 2022.
Weaknesses: Customer concentration in revenue profile: PKPL derives around 70-80 per cent of its revenue from two of its customers, which exposes the company to customer concentration. Any vendor rationalisation efforts by these clients could adversely affect the business risk profile of PKPL.
Susceptibility of operating profitability to change in material prices and forex rates: Raw material - Yarn accounts for about 50% of the total expenses and any volatility in the same shall impact the operating profitability of the company. In addition, as almost its earnings are in foreign currency, volatility in exchange rate could also impact the profitability. However, its partly offset by its forex liabilities which renders natural hedge. |
Liquidity: Adequate Bank limit utilisation is high at around 88 percent for the past twelve months ended June, 2022. Cash accruals are estimated to be in the range of Rs 14-16 crores over the medium term against repayment obligation of Rs 4.25 crores over the medium term. Current ratios is estimated to be over 1.2 time as on March 31, 2022 and is expected to improve over the medium term. Any large fund support to group companies could adversely impact the liquidity of the company and shall be a key rating monitorable. |
Outlook: Stable CRISIL Ratings believes that PKPL will continue to benefit over the medium term from its promoters' extensive industry experience. |
Rating Sensitivity factors Upward Factors:
Downgrade Factors:
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About the Company Incorporated in 1973 and based in Tirupur (Tamil Nadu), PKPL operates in the ready-made garments segment, mainly for infant wear. The company's operations are managed by Mr. A Sakthivel and Mr. Sakthivel Kaleswara Vignesh. PKPL has recently ventured into hospitality business through acquisition of two hotels. Operating out of Coimbatore and Tirupur, these are 2-star hotels with a total of 97 rooms. |
Key Financial Indicators
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Status of non cooperation with previous CRA: PKPL has not cooperated with ICRA Limited which has classified it as non-cooperative vide release dated 15-February-2019. The reason provided by ICRA Limited is non-furnishing of information for monitoring of ratings |
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)
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| 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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