| Basant | ||||
| Rating Reassigned | ||||
| 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 reassigned its ‘CRISIL A3’ rating to the short-term bank facilities of Basant
The upgrade factors in sustained improvement in business performance, with estimated revenue of Rs 336 crore in fiscal 2022, supported by revenue of Rs 237 crore booked till December 2021 and orders worth Rs 200 crore to be executed between January and June 2022, providing revenue visibility for the medium term.
Rising demand for handicrafts items in the international market and long-term association with an esteemed clientele have led to a ramp up in scale of operations. Operating efficiency has also improved, as reflected in margin of 12-13%, supported by cost cutting measures and inclusion of high-margin products such as luxury lights in the portfolio. Increase in return on capital employed (ROCE), estimated at around 54-56% in fiscal 2022 (51% during fy21), depicts efficient deployment of funds in the business. Working capital is also prudently managed with gross current assets (GCA) likely to be in the range of 80-120 days for the medium term.
The ratings also factor in the healthy financial risk profile, with networth likely to be above Rs 68 crore, led by higher accretion to reserves, and gearing below 0.1 time for the medium term. Absence of sizeable debt-funded capital expenditure (capex) should also support the financial risk profile. Liquidity has also improved, supported by sizeable net cash accrual vis-a-vis low term debt, available cushion in bank limit, funds extended by the partners and encumbered cash and cash equivalent of 8.5 crore as on December 31, 2021.
The ratings continue to reflect the established market position of the firm in the handicrafts business in overseas markets and healthy financial risk profile. These strengths are partially offset by the moderate operating profitability. |
Analytical Approach Unsecured loan extended by the partners (Rs 2.23 crore as on March 31, 2021) has been treated as debt as these funds have been withdrawn by the partners in the past. |
Key Rating Drivers & Detailed Description Strengths: Established market position in the handicraft exports business: The firm has a strong market position in the handicraft export business, backed by long-term association with reputed clients such as H&M Martis, Home Dépot and Euromarket Designs INC. The two-decade-long experience of the partners and their healthy relationships with customers, have ensured a steady flow of repeat orders. Scale of operations has improved in fiscal 2022 with revenue of Rs 336 crore projected in fiscal 2022, and Rs 237 crore booked till December 2021 and orders worth Rs 200 crore to be executed between January and June 2022, providing revenue visibility for the medium term.
Healthy financial risk profile: Financial risk profile is marked by a comfortable capital structure, evident by lower gearing of around 0.11 time expected as on March 31, 2022 (vis-à-vis 0.31 time a year before) and healthy networth of around Rs 68 crore as on the same date. Debt protection indicators are strong with expected interest cover and net cash accrual to adjusted debt (NCAAD) ratios of 31.3 times and 4.12 times, respectively, in fiscal 2022. Sustained accretion to reserves and better operating performance should support the financial risk profile in the absence of any major debt-funded capital expenditure plan.
Weakness: Moderate operating profitability: Though operating margins of the firm is improving year on year but it remains at lower levels in comparison to other players in the home décor and handicraft industry. The margins are constrained due to stiff competition in the market with the presence of various organised and unorganised players, which limits the bargaining power of the firm. Operating margins is expected at 12-13% in fiscal 2022. Going forward, sustained improvement in the operating profitability will remain a key rating sensitivity factor. |
Liquidity: Adequate Liquidity is marked by expected cash accrual of Rs 30 crore against nil debt in fiscal 2022. Utilisation of the fund-based limit of Rs 25 crore averaged only 41% over the 12 months through December 2021. Liquidity is also supported by free cash and cash equivalents of Rs 8.4 crore as on December 31, 2021, and unsecured loans extended by the partners. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the firm Basant was formed as a partnership between Mr Vinay Jain and Mr Gaurav Jain in 1998. The firm manufactures home and office furniture and handicraft items. The product range includes wooden chairs, beds, tables, and racks. Over 95% of revenue is derived from exports. The firm has a two-star export house status from the Joint Director of Foreign Trade, Ministry of Commerce and Industry, Government of India. |
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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Export Packing Credit | 25 | UCO Bank | CRISIL A3 |
This Annexure has been updated on 03-Feb-23 in line with the lender-wise facility details as on 14-Jan-23 received from the rated entity.
Criteria Details
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