Rating Rationale
September 04, 2024 | Mumbai
Lehar Footwears Limited
Ratings reaffirmed at 'CRISIL BBB-/Stable/CRISIL A3'
 
Rating Action
Total Bank Loan Facilities RatedRs.78 Crore
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
Short Term RatingCRISIL A3 (Reaffirmed)
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 BBB-/Stable/CRISIL A3' ratings on the bank loan facilities of Lehar Footwears Limited (LFL).

 

The ratings reflect the extensive experience of the promoters and comfortable financial risk profile. These strengths are partially offset by working capital-intensive operations and modest scale of operations.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: The extensive experience of promoters for more than three decades in the footwear industry and their strong understanding of market dynamics, has helped in forging healthy industry relations. Furthermore, the company has been able to penetrate different geographies, both in domestic and export territories, and have been able to create strong brand recall “Lehar”, thereby aiding its revenue profile. CRISIL Ratings believes that promoters extensive experience and strong tie-ups with the counter parties will continue to aid the business risk profile of the company over the medium term.

 

  • Comfortable financial risk profile:  Net worth of the company is likely to strengthen to an estimated Rs. 86-88 crores as of Mar 31, 2025 (Rs 76.5 crore as of Mar 31, 2024), backed by expected accretion to reserve, thereby aiding the capital structure. This, with no sizeable debt funded capital expenditure will keep the gearing ratio to an estimated 0.6-0.7 time as of Mar 31, 2025, improved from 0.9 time as of Mar 31, 2024. Further, moderate debt and stable operating profitability shall keep the debt protection indicators comfortable too, with interest coverage and net cash accrual to debt ratios estimated at around 4 times and 0.2 time, respectively, during fiscal 2025.

Weaknesses:

  • Large working capital requirements: The operations of the company are working capital intensive as reflected in gross current asset (GCA) days ranging between 240-250 days over the past few fiscals through fiscal 2024; 245 days estimated as of Mar 31, 2024. These are driven by extended credit provided to customers to combat competition and high inventory stocking, of raw material and finished products, given the diverse product mix. Resultantly, the company’s reliance on bank lines remains high, with average month end utilization of limits estimated at 91% for past 12 months through July-24, with instance of almost fuller utilization in certain months. While working capital requirement is partly aided by credit extended by the suppliers, going forward, efficient management of the same, amidst increase in revenue, leading to reduced reliance on bank lines will remain a key rating sensitivity factor.

 

  • Modest scale of operations: Owing to temporary disturbances created by implementation of BIS norms, the volume growth was subdued, thereby leading to a decline of around 25-30% in revenue during fiscal 2024, as against CRISIL Rating’s earlier expectation; revenue stood at Rs 199 crore in the discussed fiscal. While the increase in operating margin partly aided the business risk profile, overall net cash accruals at Rs 10.1 crore during fiscal 2024, standing lower than CRISL’s earlier estimates of Rs 13-14 crore. In the ongoing fiscal, improvement in demand, both from domestic and export territories is likely to aid the revenue growth by around 20-25%, and sustenance of the same amidst efficient working capital management will remain a key monitorable. Revenue was reported at Rs 64 crore during April-June in the ongoing fiscal.

Liquidity: Adequate

The liquidity profile of the company has been adequate as marked by the current ratio in the range of 1.3-1.4 times as on March 31, 2024. Owing to working capital intensive operations, bank limit utilization has been high at ~91% for the last 12 months through July 2024, with instance of almost fuller utilization in certain months. Net cash accruals are expected to be in the range of Rs 13-15 crores, which would be sufficient to meet up with annual repayment obligations ranging between Rs 3-6 crores over the medium term. Low gearing and moderate net worth provide the financial cushion to raise additional debt in case of any adverse conditions or downturn in the business.

Outlook: Stable

The company will continue to benefit from the extensive experience of its promoters and established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Sustained increase in operating income and sustenance of operating margins at 9-10%, leading to more than expected net cash accruals.
  • Efficient management of working capital cycle leading to lower reliance on working capital limits.

 

 Downward factors:

  • Decline in operating income with margins falling below 7% leading to less than expected net cash accruals.
  • Further stretch in working capital cycle leading to higher utilization on bank lines and weakening the overall cash flow position of the company.

About the Company

Lawreshwar Polymers Limited , is a Jaipur (Rajasthan) based company, is involved in manufacture of footwear under the brand name "Lehar". The company has manufacturing facility based in Jaipur.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024*

2023

Operating income

Rs crore

199.1

207.7

Reported profit after tax

Rs crore

6.55

5.17

PAT margin

%

3.29

2.47

Adjusted debt/adjusted networth

Times

0.87

1.02

Interest coverage

Times

3.16

2.81

*Provisional

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA  Bank Guarantee  NA  NA  NA  8 NA  CRISIL A3 
NA  Cash Credit  NA  NA  NA  55 NA  CRISIL BBB-/Stable 
NA  Letter of Credit  NA  NA  NA  7 NA  CRISIL A3 
NA  Proposed Working Capital Facility  NA  NA  NA  8 NA  CRISIL BBB-/Stable 
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 63.0 CRISIL BBB-/Stable   -- 07-06-23 CRISIL BBB-/Stable   --   -- Withdrawn (Issuer Not Cooperating)*
Non-Fund Based Facilities ST 15.0 CRISIL A3   -- 07-06-23 CRISIL A3   --   -- Withdrawn (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 8 HDFC Bank Limited CRISIL A3
Cash Credit 55 HDFC Bank Limited CRISIL BBB-/Stable
Letter of Credit 7 HDFC Bank Limited CRISIL A3
Proposed Working Capital Facility 8 Not Applicable CRISIL BBB-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Assessing Information Adequacy Risk
CRISILs Criteria for rating short term debt

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