| Garment Mantra Lifestyle Limited | ||||
| Rating upgraded to 'CRISIL BB+/Positive' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded the rating on the long term bank facilities of Garment Mantra Lifestyle Limited (GMLL; part of Garment Mantra group) to ‘CRISIL BB+/Positive’ from ‘CRISIL BB/Stable’.
The upgrade factors in expectation of steady improvement in operating performance over the medium term. The group’s revenues has been increasing in the past four fiscals, ending fiscal 2021, on account of their value offerings across their retail channels and steady demand from its domestic customers. Even in fiscal 2021, the group was supported by strong growth in sales post relaxation in national wide lockdown. The revenues rebounded since September 2021 and this is likely to continue even in this fiscal, resulting in revenue growth of 10-15 percent. Further the group benefits from the synergies derived from its acquisition of Jannat Fabrics and Apparels Pvt Ltd and Twenty Twenty Trading LLp in fiscal 2021. This is likely to provide greater integration across the apparel value chain and should result in improved efficiencies over the medium term. The profitability has improved to 9.1% in fiscal 2021 (from 5.7% in previous fiscal) and this is likely to remain at similar levels over the medium term. As a result, cash accruals will remain strong and support incremental working capital requirement.
The rating reflects the extensive experience of GMLL’s promoters in the domestic ready-made garments (RMG) segment and the group’s comfortable financial risk profile. These strengths are partially offset by the moderate scale of operations amidst intense competition, and the high working capital requirement. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of GMLL and its majority-owned subsidiary, Jannat Fabrics and Apparels Pvt Ltd (JFAPL). This is because the company, collectively referred to as the Garment Mantra group, operate in the same line of business and have significant financial linkages and are majorly owned by GMLL.
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: Extensive experience of the promoters in the domestic RMG segment: The decade-long presence of the promoters in the ready-made garments segment, has enabled them to understand the market dynamics and establish healthy relationships with customers, who are primarily wholesalers and retailers. This has also helped them to scale up operations reflected in revenue of Rs.167 crore for fiscal 2021.
Comfortable financial risk profile: Gearing and networth was moderate at 1.27 times and Rs.30.25 crore as on March 31, 2021 respectively. The debt protection metrics were comfortable with the interest coverage ratio and net cash accrual to total debt (NCATD) at 4.87 times and 0.23 times respectively for fiscal 2021.
Weaknesses: Moderate scale of operations amidst intense competition: Intense competition and lower capacities in the textile industry may continue to keep the scale of operations subdued, as reflected in revenue of Rs 167 crore in fiscal 2021. Textile industry is marked by the presence of both organised and unorganised players resulting in intense competition.
High working capital-intensive operations: Gross current assets is at 193 days as on March 31, 2021, on account of high inventory and receivables. Inventory is at 119 days while receivables was at 71 days as on March 31, 2021. |
Liquidity: Adequate Liquidity should remain adequate. The group is likely to generate accruals of Rs.6.5-Rs.7.5 crore in the near term which will be adequate to meet the repayment obligation of Rs.1.8 crore. The group has access to fund based limit of Rs.22.35 crore which was utilised at an average of 85-90 percent in the last 12 months ended July 2021. |
Outlook: Positive CRISIL Ratings believes GMLL will further improve its business profile. |
Rating Sensitivity factors Upward factor * Sustained improvement in scale of operation or profitability leading to accruals of over Rs.7.5 crore * Sustained improvement in financial risk profile
Downward factor * Decline in revenue or profitability leading to lower than expected accruals * Stretch in working capital requirements leading to GCA of over 250 days leading to deterioration in financial risk profile especially liquidity |
About the Group GMLL was set up in 2011, by the promoter, Mr Prem Dhinanath Aggarwal and his family. The Tiruppur-based company manufactures T-shirts under the Hylex and Monk brands.
JFAPL was incorporated in 2013, promoted by Mr Prem Dhinanath Aggarwal and his family members. The Tirupur, Tamil Nadu-based company manufactures T-shirts, which it sells under the brands Helicon and Monk |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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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* - Issuer did not cooperate; based on best-available information
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Annexure - Details of Bank Lenders & Facilities
| Facility | Amount (Rs.Crore) | Rating |
| Cash Credit | 12.55 | CRISIL BB+/Positive |
| Term Loan | 3.77 | CRISIL BB+/Positive |
Criteria Details
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