Rating Rationale
December 02, 2021 | Mumbai
Angel Fibers Limited
Ratings upgraded to 'CRISIL BBB- / Stable / CRISIL A3 '
 
Rating Action
Total Bank Loan Facilities RatedRs.57 Crore
Long Term RatingCRISIL BBB-/Stable (Upgraded from 'CRISIL BB+/Stable')
Short Term RatingCRISIL A3 (Upgraded from 'CRISIL A4+')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its ratings on the bank loan facilities of Angel Fibers Limited (AFL) to 'CRISIL BBB-/Stable/CRISIL A3' from 'CRISIL BB+/Stable/CRISIL A4+.             

 

The rating upgrade reflects the expectations of sustenance of AFL’s improved financial risk profile and consolidation of business profile. The healthy profits, restrained incremental working capital requirements are likely to improve AFL’s gearing to below 1.5 times as on March 31, 2022 from 2.47 times as on March 31, 2021. This coupled with moderate expected operating margin of around 13% shall ensure robust debt protection measures for the company. AFL’s business profile has also strengthened with estimated revenue growth of around 60% in current year, over last year’s Rs. 139 cr. The sales have been supported by over 30% quantitative growth coupled with 25% better per kg realization in cotton yarn, till September 2021. Simultaneously, company has well managed its working capital cycle with expected gross current assets moderating to below 2 months. Over medium term, the healthy annual accruals of Rs. 20-22 cr and absence of any large capex, are expected to strengthen the company’s financial profile.

 

The ratings reflect the extensive experience of the promoters and healthy debt protection measures. These strengths are partially offset by average, though improving, capital structure, restrained scale of operations and exposure to intense competition.

Analytical Approach:

Unsecured loans from the promoters have been treated as neither debt nor equity as they are subordinated to bank debt and expected to remain in the business over the medium term.

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 Prafulaben Dudhagara in 2020. The current promoters have experience of almost a decade in the textile industry and have turned the company around since taking it over. Continued support from the management (in terms of policies and timely fund infusion by way of unsecured loan) will remain a key monitorable.

 

  • Healthy debt protection measures: AFL’s debt protection measures were healthy with interest coverage and net cash accruals to total debt ratio of 3 times and 0.34 times for fiscal 2021. This was supported by sharp rebound in the profitability during the fiscal as also the continued reduction in the debt levels. Consequently, the improved operating profits and reduced finance costs resulted in the improved debt protection measures. Over medium term, these are expected to continue improving with reduction in the debt levels and lower borrowing costs.

 

  • Proximity to cotton-growing belts: AFL is based in Haripar, Jamnagar, which is a part of the cotton-growing belt in Gujarat. The company procures cotton bales largely from local ginning mills. This ensures continuous supply of raw material and reduces logistic cost, thus making operations more cost effective.

 

Weaknesses:

  • Average, though improving, capital structure:

The company had a moderate networth of Rs. 21.7 cr as on March 31, 2021. Its TOLANW (total outside liabilities to adjusted networth) ratio was high at 2.78 times on the day however it has improved sharply from previous year’s 6.1 times.

 

  • Restrained scale of operations:

The company has an average scale of operations as reflected in the turnover of Rs. 139 cr in the previous fiscal. Despite the sharp revenue growth in current fiscal, AFL’s scale of operations shall remain restrained.

 

  • Exposure to intense competition:

The spinning industry is market by presence of many organized and unorganized players and consequently, companies like AFL faces intense competition.

Liquidity: Adequate

Bank limit utilisation is moderate at around 62 percent for the past twelve months ended October 2021.  The restrained working capital cycle and healthy accruals have resulted in controlled reliance on external borrowings. Annual cash accruals of Rs. 20 cr covering repayment 2 times over. AFL also has Rs. 18 cr unsecured loans from promoters as on March 31, 2021. Current ratio is moderate at 1.13 times on March 31, 2021.

Outlook: Stable

CRISIL Ratings believes AFL will continue to benefit from the experience of its promoters in the textile spinning industry and their established relationships with customers.

Rating Sensitivity factors

Upward factors :

  • Sustained revenue growth over 20% with steady operating profitability
  • Significant improvement in capital structure

 

Downward factors:

  • Stretched working capital cycle with gross current assets exceeding 120 days or significant pressure on margin
  • Increase in debt due to capital expansion or sharp reduction in accruals impacting the financial/liquidity profile

About the Company

AFL was set up in 2014 by Rajkot-based Mr Ashok Dudhagara and his family, and started operations in June 2016. It was acquired by Mr Ramesh Ranipa and Mr Jitendra Raiyani in 2020. Operations are managed by Mr Rohan Kumar Jitendra Raiyani, son of Mr Jitendra Raiyani. AFL manufactures and exports cotton yarn.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

139

147

Reported profit after tax

Rs crore

4.9

-14.6

PAT margin

%

4.98

-9.95

Adjusted debt/adjusted networth

Times

2.47

4.30

Interest coverage

Times

3.0

1.1

 

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 crore) Complexity levels Rating assigned with outlook
NA Cash credit NA NA NA 10 NA CRISIL BBB-/Stable
NA Long-term loan NA NA Mar-2027 29.64 NA CRISIL BBB-/Stable
NA Term loan NA NA Mar-2027 7.4 NA CRISIL BBB-/Stable
NA Bank guarantee NA NA NA 2.5 NA CRISIL A3
NA Long Term Loan NA NA Mar-2023 0.71 NA CRISIL BBB-/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 6.75 NA CRISIL BBB-/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 54.5 CRISIL BBB-/Stable 25-06-21 CRISIL BB+/Stable   -- 20-11-19 CRISIL D (Issuer Not Cooperating)* 30-01-18 CRISIL B- /Stable(Issuer Not Cooperating)* CRISIL B-/Stable
      -- 28-01-21 CRISIL BB-/Stable   -- 13-03-19 CRISIL B- /Stable(Issuer Not Cooperating)*   -- --
Non-Fund Based Facilities ST 2.5 CRISIL A3 25-06-21 CRISIL A4+   -- 20-11-19 CRISIL D (Issuer Not Cooperating)* 30-01-18 CRISIL A4 (Issuer Not Cooperating)* CRISIL A4
      -- 28-01-21 CRISIL A4+   -- 13-03-19 CRISIL A4 (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) Rating
Bank Guarantee 2.5 CRISIL A3
Cash Credit 10 CRISIL BBB-/Stable
Long Term Loan 29.64 CRISIL BBB-/Stable
Long Term Loan 0.71 CRISIL BBB-/Stable
Proposed Long Term Bank Loan Facility 6.75 CRISIL BBB-/Stable
Term Loan 7.4 CRISIL BBB-/Stable
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
The Rating Process
Rating Criteria for Cotton Textile Industry
CRISILs Criteria for rating short term debt
Understanding CRISILs Ratings and Rating Scales

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