Rating Rationale
March 07, 2019 | Mumbai
Rishi Techtex Limited
Rating outlook revised to 'Positive'
 
Rating Action
Total Bank Loan Facilities Rated Rs.21 Crore (Enhanced from Rs.15.5 Crore)
Long Term Rating CRISIL BBB-/Positive (Outlook revised from 'Stable' and rating reaffirmed)
Short Term Rating CRISIL A3 (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale
CRISIL has revised its rating outlook on the long-term bank facilities of Rishi Techtex Limited (RTL) to 'Positive' from 'Stable', and reaffirmed the rating at 'CRISIL BBB-'; while assigning the short term facilities at 'CRISIL A3'

The outlook revision reflects CRISIL's belief that the business risk profile of the RTL will improve over the medium term on back of increased revenue and improved profitability. Revenue is expected to grow at 20-25% per fiscal over the medium term, supported by increased offtake from customers, expansion of the capacity and addition of new products. The company reported revenue of Rs. 60 crores in 9M fiscal 2019, compared with Rs.44.6 crores during the similar period in the previous fiscal. Operating margin also has seen a sustained improvement to 9.6% in fiscal 2018 from 7.7% in fiscal 2016. Further, operating margin was at 9.75% for the 9M fiscal 2019. Financial risk profile is expected to remain above average over the medium term.
 
The ratings continue to reflect longstanding presence and promoters' extensive experience in the technical textile industry and above-average financial risk profile marked by healthy debt protection metrics and comfortable capital structure. These strengths are partially offset by average scale of operation in a competitive industry and moderate working capital intensity of operations.
Key Rating Drivers & Detailed Description
Strengths
* Long-standing presence and promoters' extensive experience in the technical textile industry: RTL has been manufacturing woven sacks and technical textile products like shade nets for over 2 decades. This, along with promoters' extensive experience of over 3 decades, has helped the company in developing strong relationship with its customers and suppliers over the years and scale up its operations.
 
* Above-average financial risk profile: Gearing and total outside liabilities to net worth has remained comfortable at 0.70 times and 1.32 times as on March 31, 2018; on account of limited capital expenditure and modest incremental working capital. It is expected to remain adequate over the medium term because of increasing cash accruals. Debt protection measures were healthy as reflected in interest coverage of 3.54 times and net cash accruals to total debt of 0.26 times, respectively, for fiscal 2018.
 
Weakness
* Average scale of operation: Although on improving trend, revenue was average as reflected in turnover of over Rs.66.47 crore in fiscal 2018. Company derives about 50-55% of its revenue from woven sacs which is highly competitive and regional industry. Further although technical textile industry is less competitive, the demand growth and scalability is gradual which pegs the scale at average level.
 
* Moderate working capital intensity of operations: Operations are moderately working capital intensive, marked by gross current assets of 150-190 days for the past three years ended March 31, 2018. It is due to high inventory of over 103 days and moderate debtors of 54 days. Though inventory is high, the price escalation clauses partly mitigates the price risk.
Liquidity

RTL has moderate liquidity driven by expected cash accruals of Rs. 5-7 crore per annum in FY19 and FY20 and cash and cash equivalents of Rs.1 crore as on March 31, 2018. The company also has access to fund based limits of Rs.17 crore, utilized to the tune of 92% on an average over the 12 months ended January 2019. The company has long term repayment obligation of Rs 1.1 crore per annum for fiscal 2019 and 2020 and capex is expected to be around Rs.3 crore. CRISIL believes the company has sufficient accruals and cash and cash equivalents to part finance its capex requirements and incremental working capital needs over the medium term.

Outlook: Positive

CRISIL believes revenue growth will remain healthy over the medium term, supported by the established position and increased volume sales. The rating may be upgraded if there is higher than expected improvement in operating performance, with sustained financial risk profile. The outlook may be revised to Stable in case of weakening of the operating performance leading to lower cash accruals or a stretch in working capital cycle, or sizeable debt funded capex resulting in deterioration in financial risk profile.

About the Company

RTL formerly known as Rishi Packers Limited was incorporated in 1984 by Mr. Harshad Patel. The company manufactures woven sacks and technical textiles products like shade nets. The company has a manufacturing unit in Daman. The company is listed on the Bombay Stock Exchange.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs crore 66.58 59.28
Profit after tax (PAT) Rs crore 2.53 2.31
PAT margin % 3.8 3.9
Adjusted debt/adjusted networth Times 0.7 0.49
Interest coverage Times 3.61 4.55

Status of non cooperation with previous CRA
RTL has not cooperated with SME Rating Agency Of India Limited (SMERA) which has classified it as non-cooperative vide release dated April 30, 2018. The reason provided by SMERA is non-furnishing of information for monitoring of ratings.

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)
Rating assigned
and outlook
NA Bank Guarantee NA NA NA 0.2 CRISIL A3
NA Bill Discounting under Letter of Credit NA NA NA 0.5 CRISIL A3
NA Cash Credit NA NA NA 17 CRISIL BBB-/Positive
NA Proposed Long Term Bank Loan Facility NA NA NA 1.6 CRISIL BBB-/Positive
NA Long Term Loan NA NA Mar-2023 1.7 CRISIL BBB-/Positive
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  20.30  CRISIL BBB-/Positive      09-02-18  CRISIL BBB-/Stable    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  0.70  CRISIL A3      09-02-18  CRISIL BBB-/Stable    --    --  -- 
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 .2 CRISIL A3 Cash Credit 13 CRISIL BBB-/Stable
Bill Discounting under Letter of Credit .5 CRISIL A3 Non-Fund Based Limit 2 CRISIL BBB-/Stable
Cash Credit 17 CRISIL BBB-/Positive Proposed Cash Credit Limit .5 CRISIL BBB-/Stable
Proposed Long Term Bank Loan Facility 1.6 CRISIL BBB-/Positive -- 0 --
Long Term Loan 1.7 CRISIL BBB-/Positive -- 0 --
Total 21 -- Total 15.5 --
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
CRISILs Criteria for rating short term debt

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