Rating Rationale
February 27, 2025 | Mumbai
Simran International Export (India) Private Limited
Ratings reaffirmed at 'Crisil BB-/Stable/Crisil A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.27 Crore
Long Term RatingCrisil BB-/Stable (Reaffirmed)
Short Term RatingCrisil A4+ (Reaffirmed)
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 ratings on the bank loan facilities of Simran International Export (India) Private Limited (SIEIPL) at ‘Crisil BB-/Stable/Crisil A4+’.

 

The ratings continue to reflect the extensive experience of SIEIPL’s promoters in the leather industry and the company’s healthy market presence along with reputed clientele. These strengths are partially offset by working capital-intensive operations, modest financial risk profile and vulnerability of operating margin to fluctuations in foreign exchange (forex) rates along with customer concentration risk in revenue profile.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of SIEIPL. The unsecured loan of Rs 5.28 crore as on March 31, 2024, is from directors and has been treated as debt.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: The promoters have experience of over 25 years in the leather industry, which has given them an understanding of the market dynamics and enabled them to establish relationships with suppliers and customers.

 

  • Healthy market presence along with reputed clientele: SIEIPL has established long-term relationship with multinational apparel brands and worked with global entities such as Lucky Opco, Tommy Hilfiger, Hickey Fisch Veda, etc. to strengthen its technical know-how and establish a network in the overseas market.

 

Weaknesses:

  • Working capital-intensive operations: Gross current assets were at 178 days as on March 31, 2024. The large working capital requirement is owing to high lead time as the company imports its raw material and exports 100% of its finished products. Further, it is required to hold large inventory to meet the requirement of the customers in the form of raw material, work in progress and finished goods. The working capital cycle is expected to remain at 180-200 days over the medium term.

 

  • Vulnerability of operating margin to fluctuation in forex rates and customer concentration risk in revenue: As 100% of the revenue comes from the international market and 95% of it is from sales to its top five customers — Lucky Opco, Tommy Hilfiger, Mango, Hickey Fisch and Veda, it exposes SIEIPL to risks related to customer concentration in revenue profile. Any sharp fluctuation in forex rates affects realisation and accrual and any reduction in offtake from these customers or delay in realisation of receivables will also impact the company’s credit profile. SIEIPL hedges 10-15% of its open forex exposure through forward contracts.

 

Over 30% of the revenue is derived from a single customer, which exposes the company to customer concentration risk. Further, over 80-85% of the revenue is derived from the top five customers. Diversification of the customer profile will remain monitorable over the medium term.

 

  • Moderate financial risk profile: The financial risk profile of the company is moderate, as reflected by the weak gearing and debt protection metrics. The capital structure, though improved, remains leveraged as reflected in gearing of 2.02 times and total outstanding liabilities to adjusted networth of 3.36 times as on March 31, 2024. The networth remained moderate at Rs 10.69 crore as on March 31, 2024. The debt protection metrics of the company were moderate, as indicated by interest coverage of 2.36 times and net cash accrual to adjusted debt of 0.12 time in fiscal 2024.

Liquidity: Adequate

Bank limit utilisation was at 58.64% on average for the 12 months ended November 2024. Cash accrual is expected to be over Rs 2.7-3.4 crore per annum, which are sufficient against term debt obligation of Rs 2-2.4 crore over the medium term. In addition, it will cushion liquidity. The current ratio was 1.49 times as on March 31, 2024. 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 that SIEIPL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Sustained improvement in scale of operation by 20% and sustenance of operating margin over 5.8-6%, leading to higher cash accruals
  • Improvement in the financial risk profile and liquidity profile of the company

 

Downward factors:

  • Decline in operating profitability on a sustainable basis or decline in scale of operations by over 20%, leading to lower cash accruals
  • Large debt-funded capital expenditure or substantial increase in working capital requirements weakening its liquidity and financial profile

About the Company

Set up in 1992 as a partnership firm, SIEIPL was converted into a private limited company with the current name in fiscal 2013. The company manufactures and exports leather garments and accessories. It has three manufacturing facilities in Gurgaon (Haryana), Bhiwadi and Jaipur (Rajasthan) with a total installed capacity of 20,000 pieces per month. SIEIPL is owned and managed by Rajan Arora and Manjeet Kaur.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

72.17

68.69

Reported profit after tax

Rs crore

1.20

0.84

PAT margins

%

1.66

1.23

Adjusted Debt/Adjusted Net worth

Times

2.02

2.21

Interest coverage

Times

2.19

2.09

Status of non cooperation with previous CRA:

SIEIPL has not cooperated with Brickwork Ratings India Private Limited which has classified it as non-cooperative vide release dated June 06, 2022. The reason provided by Brickwork Ratings 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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 0.10 NA Crisil A4+
NA Export Packing Credit & Export Bills Negotiation/Foreign Bill discounting NA NA NA 17.50 NA Crisil A4+
NA Foreign Letter of Credit NA NA NA 6.00 NA Crisil A4+
NA Term Loan NA NA 31-Mar-28 3.40 NA Crisil BB-/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 20.9 Crisil A4+ / Crisil BB-/Stable   -- 04-01-24 Crisil A4+ / Crisil BB-/Stable 10-01-23 Crisil A4 / Crisil B+/Stable 17-11-22 Withdrawn (Issuer Not Cooperating)* Crisil A4 / Crisil B+ /Stable(Issuer Not Cooperating)*
Non-Fund Based Facilities ST 6.1 Crisil A4+   -- 04-01-24 Crisil A4+ 10-01-23 Crisil A4 17-11-22 Withdrawn (Issuer Not Cooperating)* Crisil B+ /Stable(Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 0.1 Canara Bank Crisil A4+
Export Packing Credit & Export Bills Negotiation/Foreign Bill discounting 17.5 Canara Bank Crisil A4+
Foreign Letter of Credit 6 Canara Bank Crisil A4+
Term Loan 3.4 Canara Bank Crisil BB-/Stable
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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