| Safari Industries India Limited | ||||||
| Long-term rating upgraded to 'CRISIL A+/Stable'; short-term rating reaffirmed | ||||||
| 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 upgraded its rating on the long term bank loan facilities of Safari Industries India Limited (SIIL; part of the Safari group) to ‘CRISIL A+/Stable’ from ‘CRISIL A/Stable’. Short term rating has been reaffirmed at ‘CRISIL A1’.
The rating upgrade reflects a sharp improvement in business risk profile of the group while maintaining its robust financial risk profile. Sustenance of improved business risk profile will remain key monitorable
Improvement in business risk profile is marked by sharp growth in revenue at higher-than-expected operating margin. Revenue growth is backed by increasing demand and group gaining market share in organized segment of luggage industry. Revenue improved to Rs 796 crore in the first half of fiscal 2024 against Rs 608 crore a year before, registering 31% growth. Revenue is expected to further grow over the medium term, supported by pent up demand from wedding segment, increase in air traffic, and expected higher spending on travel and tourism during fiscal 2024. Furthermore, increasing contribution from the manufacturing segment (hard luggage) with sustained shift in consumer preference towards hard luggage has resulted in improved operating margin. Operating margin improved to 17.88% in first half of fiscal 2024 (as against operating margins of 13.75% a year before).
The ratings continue to reflect an established market position in the Indian luggage industry and a strong financial risk profile. These strengths are partially offset by working capital-intensive operations and exposure to volatility in raw material prices and foreign exchange (forex) rates. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Safari and its fully owned subsidiaries, Safari Lifestyles Ltd (SLL) and Safari Manufacturing Limited (SML). This is because these companies, together referred to as Safari, are in the same line of business with operational synergies and have a common management
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established brand in the luggage industry: The organized Indian luggage industry is oligopolistic in nature. Safari is among the largest luggage brands domestically. A pan India distribution network, comprising over 100 plus company owned company operated outlets and an established product portfolio, further strengthen its market position. The group continues to launch 3-4 stores per month, aiming to cater to premium as well as mass scale segments.
Strong financial risk profile: The net worth was healthy at Rs 425.29 crore as on March 31, 2023, (Rs 300.51 crore as on March 31, 2022). The total outside liabilities to adjusted net worth ratio improved to 0.75 times as on March 31st, 2023. The financial risk profile is expected to remain strong, backed by healthy accrual. Credit metrics also remained healthy, over the medium term.
Weakness: Exposure to volatility in raw material prices and forex rates: Profitability is susceptible to prices of imported soft luggage and raw materials, which account for 55-60% of operating cost. Any sharp fluctuation is likely to impact the operating margin. Around 45-50% of the soft luggage is imported against nil exports. While forex exposure is mitigated through forward contracts, profitability continues to be susceptible to volatility in forex rates.
Working capital-intensive operations: Gross current assets (GCAs) were moderate at 163 days, driven by debtors and inventory of 51 days and 80 days, respectively, as on March 31, 2023. While debtors are moderated to 60-90 days, inventory is likely to remain around 80 days over the medium term. The improvement in inventory is backed by lower import of luggage from China and higher revenue contribution from hard luggage, which is manufactured in India and has lower inventory levels. Overall working capital levels are expected to remain around 150 to 160 days over the medium term |
Liquidity: Strong Bank limit utilization is low at around 30.93 percent for the past twelve months ended June 2023. Company expected to generate healthy cash accruals. . In addition, it will act as a cushion to the liquidity of the company. Current ratio is healthy at 2.23 times on March 31, 2023. High cash and cash equivalents of around Rs 100 crore as on Sept 30, 2023. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.
ESG Profile CRISIL Ratings believes Safari Industries Limited Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.
Safari Industries Limited has continuously focused on mitigating its environmental and social risks.
Key ESG highlights The greenhouse gas (GHG) emissions intensity has reduced from 0.67 tCO2/ revenue in 2022 to 0.57 tCO2/revenue in 2023. The total waste generation has reduced from 1.06 tonnes/ revenue in 2022 to 0.62tonnes/revenue in 2023. The Company has started manufacturing hard luggage by using polypropylene and polycarbonate material which is 100% recyclable. Companies governance profile is marked by 90% of its board comprising independent directors, and presence of robust internal control systems and processes. It also has extensive disclosures.
There is growing importance of ESG among investors and lenders. The commitment of Safari to ESG principles will play a key role in enhancing stakeholder confidence and access to capital markets |
Outlook: Stable CRISIL Ratings believes that the business risk profile of Safari group is expected to be benefited by a strong distribution network and robust positioning in the mid- to lower-segment of the market. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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Key Financial Indicators (Consolidated)
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Fully fungible between fund based and non-fund based facilities |
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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