| Rahman Industries Limited | ||||||
| Ratings reaffirmed at 'Crisil A-/Stable/Crisil A2+' | ||||||
| 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 'Crisil A-/Stable/Crisil A2+’ ratings on the bank loan facilities of Rahman Industries Limited (RIL; part of the Rahman group).
The ratings continue to reflect the Rahman group’s strong market position as a leading manufacturer of safety shoes, with established market position and diversified global footprint across countries such as Spain, France and India. With a vertically integrated business model, the group controls every stage of the value chain, from raw hide sourcing to finished products. This enables good quality, efficiency and consistency, resulting in premium products while maintaining a competitive edge. Currently, exports account for 82% of sales, with domestic sales expected to increase in the future due to growing demand for leather safety products. The company is also expanding its presence in other safety equipment such as gloves and eye wear.
In fiscal 2025, the group achieved revenue of around Rs 825 crore against Rs 800 crore in the previous fiscal, on account of slower-than-expected demand in the European market. Revenue is expected to remain at Rs 850-900 crore in fiscal 2026. However, the group has been able to maintain its operating margin at 11.50-12.00%. The margin is expected to remain stable over the medium term as most operations are backward integrated and with sales through group companies, RIL is able to pass on the price rise.
The ratings reflect the group's established market position and extensive industry experience of the promoters, supported by backward integrated operations, geographical diversification in revenue and healthy financial profile. These strengths are partially offset by susceptibility of operating profitability to volatility in raw material prices and foreign exchange (forex) rates and working capital-intensive operations. |
Analytical approach For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of RIL along with its subsidiaries and associates, Rahmco SRL, Groupe LS S. A, Safetix Mid East FZE (Safetix), LS Holding and Beier Drawtex Healthcare Propreitory Ltd (Beier). The company has taken unsecured loan of Rs 35 crore from the promoters for payment of buyback of shares which has been treated as debt.
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: Extensive experience of the promoters, supported by established market position: The promoters have experience of four decades, enabling them to navigate market dynamics and build strong relationships with customers and suppliers. The Rahman group has backward integrated into manufacturing chemicals, rubber and other auxiliary items used in leather and shoe manufacturing. This has helped it to reduce reliance on suppliers and resulted in a stable operating margin. Furthermore, the group is shifting its focus towards high-margin, value-added products such as leather shoes and upholstery, aiming to increase their share in total revenue and boost profitability. The group has also received a tender from the government of Rs 40 crore which will help in boosting sales.
Geographical diversification in revenue: The Rahman group serves a diverse client base with strong presence in markets such as India, France, Italy and South Africa. The group's past global acquisitions have also provided a solid foundation for expanding its brand presence and reach, enabling it to tap into new markets and customer segments. Diversity in geographical reach and clientele should continue to support the business risk profile. The group has been growing at a consistent pace due to its established position in the safety footwear segment, wherein 82% of the revenue comes from exports. The group currently derives more than 75% of the revenue from the shoes segment, which is its flagship product category and has established presence in the entire value chain. This end-to-end control enables it to ensure exceptional quality, efficiency and consistency across all aspects of its operations, ultimately allowing it to deliver premium products to customers.
Healthy financial risk profile: The financial risk profile is supported by comfortable estimated networth of more than Rs 558 crore in fiscal 2025 and lower reliance on external funds, yielding gearing of 0.29 time and low total outside liabilities to adjusted networth (TOLANW) ratio of 0.51 time as on March 31, 2025. The debt protection metrics are comfortable, as reflected by interest coverage and net cash accrual to total debt (NCATD) ratios of 7.12 times and 0.42 time, respectively, for fiscal 2025. These metrics are expected to remain comfortable over the medium term. The company undertook buyback of shares in September 2024 for Rs 50 crore, which was met through unsecured loan of Rs 35 crore from the promoters. Any major debt-funded capital expenditure (capex) or acquisition, impacting the overall financial risk profile of the group will remain monitorable.
Weaknesses: Working capital-intensive operations: The production of leather and leather goods requires significant working capital due to the lengthy processing time, substantial inventory requirements and extended payment cycles, making it a capital-intensive process. As a result, the Rahman group had high gross current assets (GCAs) of 230-260 days over the three fiscals ended March 31, 2025. The leather processing itself takes 30 to 45 days. Furthermore, the group has to keep 120-130 days of wet blue to meet the requirements of customers. In addition to high debtor and inventory levels, it is required to extend long credit period. Given the backward integrated nature of the business and high receivables cycle in the overseas market, the working capital cycle is expected to remain stretched over the medium term.
Susceptibility of operating profitability to volatility in raw material prices and forex rates: The group is exposed to any steep decline in prices of raw hides after their procurement. Hence, profitability remains vulnerable to sharp and adverse volatility in raw material prices over the medium term. The Rahman group has no defined policy for hedging its forex exposure. It enters forward contracts for part of its forex exposure and is exposed to risks related to volatility in forex rates for the unhedged portion. Crisil Ratings believes the Rahman group will remain exposed to volatility in prices of raw hides and forex rates. |
Liquidity: Strong Bank limit utilisation was low at 50.72% on average during the 13 months through February 2025. Cash accrual is expected to be over Rs 69 crore which will be sufficient against term debt obligation of Rs 18-19 crore over the medium term, and the surplus will cushion liquidity. The current ratio was healthy at 2.81 times as on March 31, 2025. The promoters are likely to extend support in the form of equity and unsecured loans to meet the working capital requirement and debt obligation. |
Outlook: Stable Crisil Ratings believes the group will continue to benefit from the extensive experience of its promoters and established relationships with clients. |
Rating sensitivity factors Upward factors
Downward factors
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About the company RIL, the flagship company of the Rahman group, was incorporated in 1981 by Mr Fazlur Rahman. The group manufactures and exports finished leather and leather products such as leather gloves, footwear leather and safety footwear. RIL along with its subsidiaries, owns global brands such as Lemaitre, Safetix, Mendi, Ofma, Bova and Perf. The group’s manufacturing units are located in Kanpur, Unnao and Banthar in Uttar Pradesh with global presence across France, Luxembourg, Italy, Spain, England, UAE and South Africa. The group is currently managed by Mr Nadeem Rahman (Managing Director) and his brother, Mr Kamran Rahman (Joint Managing Director). |
Key financial indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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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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