Rating Rationale
April 14, 2021 | Mumbai
Viari Exports Private Limited
Ratings migrated to 'CRISIL BB / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.10 Crore
Long Term Rating&CRISIL BB/Stable (Migrated from 'CRISIL BB / Stable ISSUER NOT COOPERATING*')
Short Term Rating^CRISIL A4+ (Migrated from 'CRISIL A4+ ISSUER NOT COOPERATING*')
& * Issuer did not cooperate; based on best-available information
^ * Issuer did not cooperate; based on best-available information
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Due to inadequate information, CRISIL, in line with SEBI guidelines, had migrated the rating of Viari Exports Private Limited (VEPL) to CRISIL BB/Stable/CRISIL A4+ Issuer Not Cooperating'. However, the management has subsequently started sharing requisite information, necessary for carrying out comprehensive review of the rating.  Consequently, CRISIL is migrating the rating on bank facilities of VEPL from 'CRISIL BB/Stable/CRISIL A4+ Issuer Not Cooperating' to 'CRISIL BB/Stable/CRISIL A4+'.

 

The rating continues to reflect the extensive experience of VEPL's promoters in the leather products industry and the company's above-average financial risk profile marked by moderate gearing and debt protection metrics. These rating strengths are partially offset by VEPL's modest scale of operations in the fragmented leather products industry and high customer concentration in its revenue profile.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of promoters in the leather products industry:

VEPL benefits from the extensive experience of its promoters in the leather product manufacturing and export industry.  The operations of the company are managed by Mr. Arijeet Purkayastha and his wife Mrs. Vidhu Purkayastha both of whom have been in the current line of business for the past twenty seven years.

 

  • Above-average financial risk profile marked by healthy gearing and debt protection metrics:

VEPL has an above average financial risk profile, on account of limited debt contracted to meet the working capital requirements. The company's gearing was healthy at about 0.71 time as of March 31, 2020. The company has healthy debt protection metrics as indicated by interest coverage.

 

Weaknesses:

  • Modest scale of operations in the highly fragmented leather products industry:

VEPL's business risk profile remains constrained by its modest scale of operations in the intensely competitive leather products industry. The company's modest scale is indicated by its revenue of Rs.29.32 crore during fiscal 2020 (refers to financial year, April 1 to March 31). The modest scale of operations prevents the company from deriving benefits of economies of scale.

 

  • High customer concentration risk:

VEPL's top two customers account for about 80 per cent of its sales. The high customer concentration renders the company's revenue growth and profitability susceptible to the growth plans of its key customers

Liquidity: Adequate

Bank limit utilisation is moderate at around 80 percent for the past twelve months ended January 2021. Cash accrual are expected to be over Rs.1.5 crores which are sufficient against term debt obligation of Rs.0.5-1 million over the medium term. In addition, it will be act as cushion to the liquidity of the company.

Outlook Stable

CRISIL Ratings believes that VEPL will benefit over the medium term from its promoters' extensive industry experience.

Rating Sensitivity factors

Upward factor

  • Sustained improvement in scale of operation by 20% and sustenance of operating margin at 9 per cent
  • Improvement in working capital cycle

 

Downward factor

  • Decline in operating profitability by over 200 basis points on a sustainable basis or decline in scale of operations
  • Large debt-funded capital expenditure weakens capital structure

About the Company

Based in Chennai, VEPL manufactures leather products such as bags, belts, and wallets. Its day-to-day operations are managed by the promoters Mr. Arijeet Purkayastha and Ms. Vidhu Purkayastha.

Key Financial Indicators

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

29.32

22.62

Reported profit after tax

Rs crore

0.77

0.06

PAT margins

%

2.58

0.38

Adjusted Debt/Adjusted Net worth

Times

0.71

0.10

Interest coverage

Times

9.40

12.83

 

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.Cr)

Complexity levels

Rating assigned with outlook

NA

Foreign Bill Exchange

NA

NA

NA

4

NA

CRISIL A4+

NA

Packing Credit

NA

NA

NA

3

NA

CRISIL BB/Stable

NA

Working Capital Term loan

NA

NA

NA

3

NA

CRISIL BB/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 10.0 CRISIL BB/Stable / CRISIL A4+   -- 28-01-20 CRISIL BB /Stable / CRISIL A4+ (Issuer Not Cooperating)*   -- 09-10-18 CRISIL BB/Stable / CRISIL A4+ CRISIL BB+/Stable / CRISIL A4+
      --   --   --   -- 26-09-18 CRISIL BB+ /Stable / CRISIL A4+ (Issuer Not Cooperating)* --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Foreign Bill Exchange 4 CRISIL A4+ Foreign Bill Exchange 4 CRISIL A4+ (Issuer Not Cooperating)*
Packing Credit 3 CRISIL BB/Stable Packing Credit 3 CRISIL BB /Stable(Issuer Not Cooperating)*
Working Capital Term Loan 3 CRISIL BB/Stable Proposed Working Capital Facility 3 CRISIL BB /Stable(Issuer Not Cooperating)*
Total 10 - Total 10 -
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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