Rating Rationale
November 14, 2017 | Mumbai
Safari Industries India Limited
Ratings upgraded to 'CRISIL A-/Stable/CRISIL A2+'
 
Rating Action
Total Bank Loan Facilities Rated Rs.90 Crore
Long Term Rating CRISIL A-/Stable (Upgraded from 'CRISIL BBB+/Positive')
Short Term Rating CRISIL A2+ (Upgraded from 'CRISIL A2')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities of Safari Industries India Limited (Safari) to 'CRISIL A-/Stable/CRISIL A2+' from 'CRISIL BBB+/Positive/CRISIL A2'.

The upgrade follows the equity infusion of Rs.51 crores by way of preferential allotment of shares to a Foreign Portfolio Investor & an Alternative Investment Fund registered with the Securities and Exchange Board of India, on 31 October, 2017. The company is expected to utilise the funds to lower external debt in the near to medium term, fund future capital expenditures and growth of the company. CRISIL had on 23rd October, 2017 upgraded the ratings to 'CRISIL BBB+/Positive/CRISIL A2' from 'CRISIL BBB/Positive/CRISIL A3+'. The upgrade was driven by Safari's above-average growth and expectation of further improvement in business risk profile backed by increasing demand, growing distribution network and diversified product mix.

Key Rating Drivers & Detailed Description
Strengths
* Established brand in luggage industry: The organised Indian luggage industry is oligopolistic in nature. Safari gradually improved its market share and revenue grew at a compound annual rate of 40% over the four fiscals through 2017. A pan-India distribution network, comprising over 3,500 customer touch points, and diversified product portfolio, further strengthen the market position.

* Strong financial risk profile: Safari raised Rs.51 crores by way of preferential allotment to a Foreign Portfolio Investor & an Alternative Investment Fund registered with the Securities and Exchange Board of India, during October, 2017; resulting in significant further improvement in financial risk profile on account of expected lower reliance on external debt for working capital and for future capital expenditure. Networth was healthy at Rs 94.7 crore as on March 31, 2017, against Rs 86.0 crores a year earlier TOL/ANW ratio was comfortable at 1.03 times as on March 31, 2017.

Weaknesses
* Exposure to volatility in raw material prices and foreign exchange (forex) rates: Profitability is susceptible to prices of imported soft luggage and raw materials, which account for over 45% of operating cost. Any sharp fluctuation is likely to impact the operating margin. Forex exposure is partially mitigated through forward contracts.

* Working capital intensive operations:  The operations of the company is working capital intensive, gross current assets during fiscal 2017 is at 164 days. While the debtors and creditors are 58 days and 66 days respectively, inventory holding is high at 103 days since the company needs to maintain higher inventory due to seasonality of sales, especially for the first quarter of the fiscal.
Outlook: Stable

CRISIL believes Safari will benefit over the medium term from growing luggage industry, strong distribution network and its positioning in the mid to lower segment of the market. The outlook may be revised in case the scale of operations improves significantly while maintaining the profitability and healthy financial risk profile. The outlook may be revised to negative in case of significant decline in growth or significant decline in profitability leading to weakening of the business and financial risk profile.

About the Company

Safari was incorporated in 1980 by Mr Mehta and family. The company was taken over by Mr Sudhir Jatia in 2012. It manufactures and sells luggage under the brand, Safari. The manufacturing unit is at Halol, Gujarat. Safari is listed on the Bombay Stock Exchange.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs. Cr. 359.2 277.3
Profit after tax (PAT) Rs. Cr. 9.8 7.7
PAT margins % 2.7 2.8
Adjusted debt/adjusted networth Times 0.5 0.7
Interest coverage Times 6.0 5.9

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
with outlook
NA Cash Credit NA NA NA 66.91 CRISIL A-/Stable
NA Letter of Credit NA NA NA 19.50 CRISIL A2+
NA Term Loan NA NA Oct-2020 3.59 CRISIL A-/Stable
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  70.5  CRISIL A-/Stable  23-10-17  CRISIL BBB+/Positive    No Rating Change  30-12-15  CRISIL BBB/Stable    --  -- 
        06-01-17  CRISIL BBB/Positive               
Non Fund-based Bank Facilities  LT/ST  19.5  CRISIL A2+  23-10-17  CRISIL A2    No Rating Change  30-12-15  CRISIL A3+    --  -- 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 66.91 CRISIL A-/Stable Cash Credit 66.91 CRISIL BBB+/Positive
Letter of Credit 19.5 CRISIL A2+ Letter of Credit 19.5 CRISIL A2
Term Loan 3.59 CRISIL A-/Stable Term Loan 3.59 CRISIL BBB+/Positive
Total 90 -- Total 90 --
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Criteria for rating short term debt

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