| Celebrity Fashions Limited | ||||||
| Long-term rating downgraded to 'CRISIL BB-/Stable'; Short-term rating reaffirmed | ||||||
| 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 downgraded its rating on the long term bank facilities of Celebrity Fashions Ltd (CFL) to ‘CRISIL BB-/Stable’ from ‘CRISIL BB/Stable’. The short term rating is reaffirmed at ‘CRISIL A4+’.
The downgrade reflects weakening of business risk profile owing to loss of customer who contributed over 60 percent of the company’s revenue. The company reported operating income of Rs.36.24 crores for Q1 which is an 63.2 percent decline. Company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) at negative 16.14 percent during the same period; the EBITDA margin was 5.65% for fiscal 2024. The EBIDTA loss is largely attributable to lower fixed cost absorption post decline in scale of operations. In fiscal 2025, revenue and EBIDTA margin is expected to be substantially lower than previous fiscal.
The rating action also reflects weakening of financial profile due to lower accruals. The improvement in operating performance in the ensuing quarters and the resultant improvement in financial profile will remain a key rating monitorable.
The ratings continue to reflect the extensive experience of the promoters in the readymade garment export industry and moderate working capital cycle. These strengths are partially offset by average financial risk profile and exposure to intense competition. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters have more than two decades of experience in the readymade garment export industry; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business. The Company has achieved revenue of Rs.364.24 crore in fiscal 2023 and Rs.342.62 crore in Fiscal 2024. CRISIL Ratings believes that CFL will continue to benefit from the extensive experience of the promoters over the medium term.
Moderate working capital cycle: Its moderate working capital management is reflected in its estimated gross current assets (GCA) of 125 days as on March 31, 2024 on account of debtor days of 67 days and inventory of 41 days.
Weakness: Average financial risk profile: Financial risk profile is marked by moderately high capital structure and moderate debt protection metrics. Capital structure is leveraged marked by gearing and Total Outside Liabilities/Tangible Networth (TOL/TNW) of 1.83 time and 3.43 time, respectively, as on 31st march 2024. Debt protection metrics is moderate marked by interest coverage ratio (ICR) of 2.15 times and Net cash accruals to adjusted debt (NCAAD) of 0.17 time in fiscal 2024.
ICR and NCAAD will be impacted in fiscal 2025 on account of EBIDTA loss in Q1 of FY 25. Capital structure is expected to remain moderately high due to PAT loss on account of impact in operating performance in Q1.
Exposure to intense competition: The readymade garment export industry comprises several unorganised players in India, Bangladesh and Southeast Asia. Thus, intense competition will continue to constrain scalability, pricing power and profitability of players such as CFL. |
Liquidity: Stretched Expected net cash accrual in fiscal 2025 may not suffice to cover the debt obligation. However, the same will be met through existing liquidity. Company currently has unencumbered cash and bank balance of Rs.2.5 crore which supports their liquidity position. Company has preference share redemption of Rs.5 crore per annum over the medium term. Company has raised funds to repay preference shares from FY 22 to FY 24. |
Outlook: Stable CRISIL Ratings believes, CFL will continue to benefit from the extensive experience of its promoters. |
Rating Sensitivity Factors Upward Factors
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About the Company Incorporated as a private-limited company in 1988 and reconstituted into a public-limited company in 2005, CFL manufactures and exports woven cotton garments for men and women. The company is listed on National Stock Exchange and Bombay 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 - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
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Criteria Details
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