| Birla Advanced Knits Private Limited | ||||
| 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 reaffirmed its ‘CRISIL A+/Stable’ rating on the long-term bank facilities of Birla Advanced Knits Pvt Ltd (BAKPL).
BAKPL is a 50:50 joint venture (JV) between Grasim Industries Ltd (Grasim; ‘CRISIL AAA/Stable/CRISIL A1+’) and Century Textiles and Industries Ltd (Century; ‘CRISIL AA/Stable/CRISIL A1+’). Incorporated in July 2021, the company has set up a plant at a cost of Rs 181 crore in Bharuch, Gujarat, to manufacture and sell viscose knit fabric. The plant commenced commercial production in April 2023 and has capacity of 600 metric tonne (MT) per month. BAKPL has commissioned this plant without cost overrun or any significant delays. The plant is operating at around 20% capacity, which is expected to ramp-up as the company develops market presence.
The rating also factors in the financial (in the form of equity and intercorporate deposits [ICDs]) and operational support BAKPL receives from its promoters, their extensive experience in the textile and viscose industry as well as project execution capabilities. The company has a Board-approved ICD line from Grasim, which is available at Grasim’s discretion, to meet liquidity requirements.
These strengths are partially offset by the nascent stage of operations and average financial risk profile, constrained by large debt. |
Analytical Approach CRISIL Ratings has applied its criteria for notching up ratings to factor in support from the parent, Grasim. Also, the parent is likely to provide need-based funding support in case of cash flow mismatch. |
Key Rating Drivers & Detailed Description Strengths:
The company will receive strong operational and financial support from both JV partners. BAKPL’s plant is set up on the plot owned by the Bharuch unit of Century. Besides, Century extends operational support and caters to around 25% of the spinning needs of BAKPL. In addition, the extensive experience of Grasim in the viscose and textile markets and its position as the key supplier of viscose to BAKPL support operations. Furthermore, timely funding support in case of cashflow mismatch, if any, will be met by Grasim.
The promoters have established relationships with reputed clients in the textile industry. Both Century and Grasim, having started textile operations in 1897 and 1947, respectively, have strong operational track record, with vast capacities and operational expertise, which will support the business risk profile of BAKPL.
Weakness:
The company commenced operations in April 2023, as against an earlier estimate of January 2023. Currently, the plant operates at average utilisation of 20%. Owing to the emerging demand for viscose knit fabric, the company is focusing on understanding market requirements better and hence the lower plant utilisation level.
The financial risk profile is weak, constrained by the nascent stage of operations. Repayment for the term debt obligation will begin from September 30, 2024. The plant may have low cash accrual to repayment ratio in the initial years. Grasim is likely to provide timely funding support to cover the cash flow requirement of the company. |
Liquidity: Adequate The company has term debt of Rs 145 crore, repayment of which will commence from September 30, 2024 (fiscal 2025). It has enhanced its term loan to Rs 155 crore for setting up an effluent treatment plant in Bharuch; repayment of this loan will begin from fiscal 2025. It also has working capital financing of Rs 30 crore against nil debt-funded capital expenditure (capex). Furthermore, in case of working capital mismatch and shortfalls, Grasim will provide funding support in a timely manner. |
Outlook: Stable CRISIL Ratings believes while BAKPL’s operations are in the nascent stage, the extensive experience of the promoters in the textile and viscose industry and their need-based financial support will strengthen the business. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company BAKPL was set up in July 2021 as a 50:50 JV between Grasim and Century. The company has set up a unit in Bharuch, Gujarat, to manufacture viscose knit fabric. The plant was recently commissioned on April 1, 2023, with installed capacity of 600 MT per month. |
About the Promoters Grasim Industries Ltd Incorporated in 1947, Grasim is the flagship company of the Aditya Birla group. It commenced operations in 1948 as a textile manufacturer and is the sole producer of viscose staple fibre (VSF) in the domestic market. The viscose segment also comprises the viscose filament yarn business of the merged Aditya Birla Nuvo Limited and acquired rights to manage and operate the rayon division of Century with effect from February 1, 2018. The chemicals segment comprises caustic soda, chlorine VAPs and advanced material businesses. The company is also present in the textile and insulator industries. In January 2021, Grasim announced its entry into the decorative paints business, with initial capex of Rs 5,000 crore to be spent over the next three years.
Century Textile and Industries Ltd Incorporated in 1897, Century is promoted by Mr BK Birla. Following equity infusion in March 2015 and December 2015, the AB group is a significant stakeholder in the company. As on June 30, 2021, the promoters held 50.21% stake in the company. Mr Kumar Mangalam Birla was appointed Chairman effective July 20, 2019, following the demise of Mr BK Birla. Century operated a cotton textile mill until 1951. Since then, it has expanded into diverse fields by setting up manufacturing units in rayon, cement and pulp and paper segments. The company also ventured into the real estate business. It manufactures a variety of paper products (including multi-layer packaging board and tissue paper) with total installed capacity of 4.86 lakh tonne per annum. In fiscal 2018, the company incorporated a wholly owned subsidiary, Birla Estates Private Ltd, to focus on the residential real estate business. |
Key Financial Indicators (BAKPL)
Financials not material as project commenced operations on April 1, 2023 |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Capex LC of Rs 120 crore as sub-limit |
| 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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