| Baazar Style Retail Limited | ||||
| Rating outlook revised to 'Positive'; Rating reaffirmed; Rated amount enhanced for Bank Debt | ||||
| Rating Action | ||||
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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 revised its outlook on the long-term bank facilities of Baazar Style Retail Limited (BSRL) to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘CRISIL BBB+’.
The revision in outlook factors in healthy growth in turnover and sustained improvement in profitability with revenue having increased to Rs 796 crore in FY23, exhibiting ~45% growth over FY22 backed by increased market penetration, post covid-19 demand recovery, higher average ticket size and breakeven achieved in stores opened in FY22 and FY23. Going forward, with continuous addition of new stores and increased market penetration, the business risk profile is expected to improve along with sustenance of liquidity and financial risk profile. The total number of operational stores in FY23 were 135 as against 106 in FY22. Further growth in turnover along with sustenance of operating margins around 7% will be key rating sensitivity factors.
Together with calibrated expansions and minimal reliance on debt, BSRL has been able to sustain its strong financial risk profile characterised by a conservative capital structure and robust debt protection metrics. Backed by healthy generation of accruals and BSRL relying on internal accruals and funding for its capital expenditure (capex) plans, BSRL has also sustained its comfortable liquidity risk profile.
The rating continues to reflect BSRL’s healthy financial risk profile, geographical diversification, rising revenue and profitability, and high growth potential for the apparel industry in India. These strengths are partially offset by exposure to intense competition. |
Key Rating Drivers & Detailed Description Strengths: Healthy financial risk profile: Gearing is estimated to be strong at around 0.40 time as on March 31, 2023. Networth remains strong estimated at Rs 228 crore as on March 31st, 2023 marked by continuous infusion of equity. Debt protection metrics are robust, with interest coverage ratio estimated at 6 times and Net cash accruals to Adjusted debt (NCA/AD) ratio at around 0.50 times in fiscal 2023. Gradual decline in debt with better working capital management is expected to support the debt protection metrics over the medium term. Steady profitability should result in sizeable accretion to reserves, thereby keeping the networth and capital structure comfortable.
Geographical diversification aided by new stores in eastern India: Over the years, the company has widened its geographical presence beyond West Bengal and Odisha by entering Andhra Pradesh, Assam, Bihar, Jharkhand and Tripura, Uttar Pradesh and Chhattisgarh. This protects operations from adverse political or economic conditions in any one state. However, West Bengal will remain the major contributor to revenue over the medium term.
Improving scale and profitability: The company has exhibited an increase in the turnover to Rs 796 crore in fiscal 2023 from Rs 47 crore in fiscal 2015 due to its aggressive expansion strategies and the promoters’ experience. Increased efficiency in new stores has supported profitability. Further growth in turnover along with sustenance of operating margins around 7% will be key rating sensitivity factors.
Weakness: Exposure to intense competition: High profitability, healthy growth prospects and ease of sourcing have encouraged many organised and unorganised entities to enter the garments segment. The intense competition will continue to constrain scalability, pricing power and profitability. |
Liquidity: Adequate Cash accruals are estimated over Rs 40 crore over the medium term against debt repayment obligation of Rs 8 crore per annum over the medium term. Bank limit utilisation of fund based limits was moderate at 75% on average over the 12 months through May 2023. Timely infusion of equity and unsecured loans from the promoters and investors is expected to support liquidity. Current ratio stood healthy estimated around 1.40 times on March 31, 2023. Low gearing and moderate networth should continue to support liquidity |
Outlook: Positive BSRL should continue to benefit from extensive experience of its promoters and established market position. |
Rating Sensitivity factors Upward Factors: * Sustained growth in revenue and improvement in profitability to around 7% leading to healthy accruals * Further improvement in working capital cycle led by improvement in inventory and creditor management thereby leading to sustenance of the healthy financial and liquidity risk profile
Downward Factors: * Substantial increase in the working capital requirements leading to increase in GCAs * Substantial reduction in profitability with accruals below Rs 20 crore and/or any large debt funded capex thereby weakening the financial and liquidity risk profile |
About the Company Incorporated in June 2013, BSRL sells readymade garments, footwear, toys, accessories, cosmetics, luggage, and other household items and home furnishings through its 135 departmental stores, primarily in eastern India. The stores are run under the Style Baazar brand in West Bengal, Odisha, Jharkhand, Bihar, Assam, Andhra Pradesh and Tripura, Uttar Pradesh and Chhattisgarh. |
Key Financial Indicators
*CRISIL Ratings’ adjusted numbers |
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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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