| Campus Activewear Limited | ||||||
| Ratings reaffirmed at 'CRISIL A+/Stable/CRISIL A1'; 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 ratings on the bank facilities of Campus Activewear Ltd (CAL; part of the Campus group) to ‘CRISIL A+/Stable/CRISIL A1’.
The rating continues to reflect the company’s strong business risk profile. In 9MFY23 company has achieved the revenue of Rs.1126 cr. with sales volume rising to 1.80 crore pairs from 1.36 crore in 9MFY22 and average selling price increasing to Rs 630 per pair from Rs 547 in FY21. The revenue is expected to grow in the range of 25%-30% in fiscal 2023 supported by expected ramp-up of operations following capacity enhancement, healthy demand from 2500+ new designs launched and strong brand recall in the mid-premium segment. Earnings before interest, tax, depreciation and amortisation (Ebitda) declined to ~17.34 in 9MFY23 from 19.43% in 9MFY22, due to the rising raw material prices. The margin is expected to remain comfortable at around 18-20% over the medium term which is supported by the inhouse sole manufacturing unit in Ganaur and sustained price pass-through to end consumers in a regulated manner. Focus on exclusive brand outlets, diversification through online channels and franchisee model should continue to support the business risk profile and healthy return on capital employed (RoCE) over the medium term. Sustenance of working capital cycle, primarily inventory management, remains a key monitorable.
The ratings also factor in the strong financial risk profile of the Campus group, driven by expected networth of over Rs 700 crore in FY23 backed by continuous accretion to reserve. Gearing is expected to remain less than 1 time in FY23, driven by expected healthy cash accrual leading to strong networth. Debt protection metrics remained healthy with expected interest coverage and net cash accrual to adjusted debt ratio of 15 times and 1.2 times, respectively, in fiscal 2023.
In August 2017, TPG Growth III SF Pte. Ltd, the growth equity platform of American investment firm has acquired a significant minority (17.19 percent) stake in Campus. Post the listing in May 2022 the stake was reduced to 7.63%. TPG Growth III SF Pte. Ltd. has further sold its remaining stake of 7.63% through the open market sales Rs. 347.24 per share on March 24, 2023.
The ratings continue to reflect the healthy market position of the Campus group in the footwear industry backed by strong brand, geographically diversified presence and wide product portfolio, along with comfortable financial risk profile. These strengths are partially offset by stretched working capital cycle and exposure to intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CAL and its wholly owned subsidiary Campus AI Pvt Ltd (CAIPL). This is because both the entities, together referred to as the Campus group, are in the same business and have strong business linkages. Moreover, CAIPL is being merged with CAL, for which approval from the National Company Law Tribunal (NCLT) is received on Aug 11, 2022.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Strong Cash accrual is expected to remain healthy at Rs 200-230 crore per annum, against yearly debt obligation of Rs 40-50 crore over the medium term. Bank limit was utilised 65-70% over the 12 months through Feb 2023. Current ratio is expected to remain moderate at 1.5 times as on March 31, 2023. The group had unencumbered cash balance of Rs.1.4 crores as on Sep 30, 2022. |
Outlook: Stable The Campus group will continue to benefit from its healthy market position, aided by strong brand visibility and diverse product range. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company In 1983, Mr H K Agarwal founded the Action brand, which became a household name in the casual and sports footwear segments in India. Mr Agarwal and his brothers subsequently entered other sectors, such as healthcare, power and coal mining. In 1997, the Action group launched its premium Campus brand.
CAL, incorporated in 2008, and CAIPL established in August 2015 as a partnership firm and reconstituted in 2020 as a private limited company, are part of the Hari Krishan Aggarwal group, which has been in the footwear business for over three decades. CAL did not have any significant operations before March 2017. In May 2022 the company got listed on the Bombay Stock Exchange and the National Stock Exchange. |
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 – List of entities consolidated
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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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This Annexure has been updated on 10-Apr-23 in line with the lender-wise facility details as on 16-Nov-22 received from the rated entity.
Criteria Details
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