| TCNS Clothing Co. Limited | ||||||
| Rating outlook revised to 'Stable'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 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 revised its outlook on the long-term bank facilities of TCNS Clothing Co. Limited (TCNS) to ‘Stable’ from ‘Negative’ while reaffirming the rating at 'CRISIL A+’. The short-term rating has also been reaffirmed at ‘CRISIL A1+’
The revision in the outlook reflects the revival in the overall operating performance of the company which got impacted due to Covid-19 in last 2 fiscals ending fiscal 2022. In H1FY23 the company achieved the revenue of Rs. 632 cr. and expected to report revenue of more than Rs.1200 cr. for the full fiscal 2023 (against the revenue of Rs.897 crore during fiscal 2022). The above growth has been driven by improved footfalls with the current festive season as company’s all stores are now fully operational. TCNS has introduced 66 new showrooms during H1FY2023 and will further introduce more new showrooms which will support the revenue growth over the medium term. Operating margin remained moderate in fiscal 2022 to 10.2% on account of business impacting during Q1FY22 due to second wave of COVID-19. Various mitigation measures are undertaken like the closing of some stores focus of online channels, lease rent waivers, supply chain optimization etc. leading to improvement of margins in H1FY23 to ~12.5% and H2 being festive season the margins for the are expected to improve further and are estimated to remain in the range of 12-14% for fiscal 2023.
Financial risk profile of the company has remained comfortable in absence of any long-term debt obligations supported by healthy net worth of more than Rs. 616 crores as on March 31, 2022. Supported by continuous healthy accretion of reserves and in absence of any major debt funded capex and Nil long term debt obligations the over the medium term the financial risk profile of the company is expected to remain comfortable.
The ratings continue to reflect the company’s strong brand equity, its focus on design and marketing, pan-India market reach, and established position in the women's ethnic wear segment. The ratings also factor in a strong financial risk profile. These strengths are partially offset by large working capital requirement and exposure to intense competition in the textile garments business. |
Key Rating Drivers & Detailed Description Strengths:
Operations faced headwinds with operating income moderating to Rs. 897 crores in Fiscal 2022, the same has revived in current in H1FY23 and the company is achieved the revenue of Rs. 632 cr. and expected to cross revenue of more than Rs.1200 cr. for the full fiscal and is expected to remain healthy owing to demand coming from new showrooms.
Over the last three years company is continuously doing capex for expansion of its stores. In-line to that company will be doing further capex in fiscal 2023 also. The capex will be fully funded through companies’ internal accruals. Company is into the expansion mode to increase its brand visibility and has opened 48 new stores in fiscal 2022 and in H1FY23 company has already opened 66 new stores.
Weakness:
|
Liquidity: Strong: Liquidity is supported by sizeable cash accrual of more Rs. 100-150 crores in fiscal 2023 with Nil repayment obligations. Company also has bank limit of Rs. 75 cr. which utilized to the tune of 2-3% on an average for last 12 months ending Nov 2022. Company having cash and bank balance along with liquid investment of around Rs. 40 crores as on Sep 2022. The liquid fund of Rs.156 cr. was maintained till Mar 2022. However, the same was significant reduced on account of regular capex and incremental working capital requirements of regular business. This portion is likely to be remain unencumbered and support the liquidity. Current ratios of the company has remained healthy at more than 2 times and is expected to remain healthy over the medium term. |
Outlook Stable CRISIL Ratings believes TCNS will continue to benefit from its healthy brand recognition, pan-India presence, established market position, and strong financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company TCNS was set up in December 1997 by the promoters, Mr OS Pasricha and Mr AS Pasricha and is a professionally managed company listed on the BSE and the NSE. The company manufactures and retails ethnic and fusion women's wear. Garments are retailed through exclusive stores, multi-brand outlets, and chains such as Lifestyle, Reliance Trends, Pantaloons, and Shoppers Stop. It has 648 exclusive stores in more than 100 cities as on date. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
|
Criteria Details
|