| U.K.Textiles | ||||
| Rating reaffirmed at 'CRISIL B / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank facilities of U.K.Textiles (UKT) at 'CRISIL B/Stable'.
The rating continues to reflect UKT's modest financial risk profile and large working capital requirements. These rating weaknesses are partially offset by the extensive experience of the promoter in the ready-made garments (RMG) segment and the firm's moderate operating efficiency. |
Key Rating Drivers & Detailed Description Weakness: Modest financial risk profile: With networth in the range of Rs. 6 crore against high bank funded working capital debt, gearing remains modest at more than 4 times in fiscal 2020. However, with expectation of healthy accretion to reserves in the absence of any major debt funded capex plans along with repayment of existing long term loans, capital structure is expected to improve over the medium term.
Large working capital requirements: UKT's operations are working capital intensive, as reflected in its high GCA days, estimated at 381 as on March 31, 2020. This is primarily on account of its large inventory holding requirements of around 177 days on account of its long working capital cycle. However, the same is partially supported by credit period received from the suppliers.
Strengths: Extensive experience of the promoter in the RMG segment: UKT benefits from the extensive industry experience and domain expertise of its promoter in the textile segment. The promoter Mr. Unni Krishnan Menon , who has been in the RMG segment for over four decades, set up UKT in 1983 to cater to the export markets. Strong market presence over the years has led to development of healthy trade relations with both export as well as domestic customers, reflected in steady revenue growth rate. Promoter’s comprehensive market understanding is expected to continue supporting business risk profile over the medium term.
Moderate operating efficiency: Margin has been more than 10% during the last three fiscals, ended on March, 2020. The same is due to long standing presence in the industry which has helped in establishing strong trade relations with suppliers and customers. |
Liquidity: Stretched Average bank limit utilization for the last 12 months ended on November, 2020 is moderate at less than 80%. Expected net cash accruals in the range of Rs. 1.8 crore is sufficient against repayment obligations of less than Rs. 0.5 crore. Current ratio is moderate at 1.1 times as on March 31, 2020 |
Outlook Stable CRISIL Ratings believes that UKT will continue to benefit over the medium term from its established relationship with key customers. |
Rating Sensitivity factors Upward Factors: Strong revenue growth rate while maintaining EBITDA margin of more than 15% Efficient working capital management, maintenance of moderate capital structure no major withdrawal
Downward Factors: Further decline in revenue or EBITDA Margin falling below 10% Larger than expected working capital requirement, significant debt funded capex or major withdrawals |
About the Company UKT, set up as a proprietorship firm in 1983, manufactures knitted RMG, primarily for women. Its day-to-day operations are managed by Mr. Unni Krishnan Menon. |
Key Financial Indicators
*Provisional |
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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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