| Angel Fibers Limited | ||||||
| Long-term rating downgraded to 'CRISIL BB-/Stable'; Short-term rating reaffirmed; Ratings Withdrawn | ||||||
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| 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 downgraded its rating on the long-term bank facilities of Angel Fibers Ltd (AFL) to 'CRISIL BB-/Stable' from 'CRISIL BB/Negative’ and reaffirmed its ‘CRISIL A4+’ rating on the short-term bank facilities of the entity. The ratings were subsequently withdrawn on the request of the company and on receipt of a no-objection certificate from the banker. The action is in line with the withdrawal policy of CRISIL Ratings.
The downgrade reflects a belief that the business performance of AFL will continue to weaken, led by a sharp decline in revenue and losses incurred during fiscal 2023. Liquidity was stretched due to shutdown of the plant, driven by shortage in raw material (cotton) and the consequent hike in its price along with disruption in the value chain considering sizeable term debt obligation. Furthermore, the capital structure may weaken due to availing of Covid lines. Ability of the company to revive operations while improving the financial risk profile will remain a key monitorable.
The ratings continue to consider the extensive experience of the promoters in the textile industry and moderate debt protection metrics. This strength is partially offset by modest scale of operations amid intense competition and average capital structure. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the management: Mr Ramesh Ranipa and Mr Jitendra Raiyani acquired AFL from Mr Ashok Dudhagara and Ms Prafula Dudhagara in 2020. The promoters have almost a decade of experience in the textile industry and have turned the company around since taking it over; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to aid the business. Sustained support from the management (in terms of policies and timely infusion of unsecured loan) will remain a key monitorable.
Moderate debt protection measures: AFL’s debt protection measures were moderate with interest coverage and net cash accruals to total debt ratio of 2.12 times and 7% for fiscal 2023. This was on account of the continued reduction in the debt levels. However, with reporting of losses in fiscal 2023 and subdue industry scenario, the debt protection metrics expected to remain moderate.
Weaknesses: Modest scale of operations amid intense competition: Revenue declined to Rs 120.7 crore in fiscal 2023, from Rs 229.1 crore in fiscal 2022, owing to shortage of raw material (cotton), increase in its price and disruption in the value chain. Ability of the company to revive operations remains a key monitorable. Further, the textile industry is highly fragmented, and the consequent intense competition may continue to constrain scalability, pricing power and scalability.
Average financial risk profile: Networth was Rs 26.60 crore, gearing at 2.05 times and total outside liabilities to adjusted networth ratio at 2.48 times as on March 31, 2023. However, the capital structure is expected to improve over the medium term, backed by scheduled repayment of loans. |
Liquidity: Stretched Cash accrual is projected at Rs 9.28-11.6 crore per annum, barely sufficient to meet the term debt obligation of Rs 9.24 crore over the medium term. However, the promoters are likely to extend timely, need-based funds to support financial flexibility. |
Outlook: Stable AFL will continue to benefit from the experience of its promoters and their established relationship with customers. |
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About the Company AFL was incorporated in 2014 by Rajkot (Gujarat)-based Mr. Ashok Dudhagara and his family members; it commenced operations in June 2016. It was acquired by Mr. Ramesh Ranipa and Mr. Jitendra Raiyani in 2020. Mr. Rohan Kumar Jitendra Raiyani, son of Mr. Jitendra Raiyani, manages the operations. AFL manufactures and exports cotton yarn. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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