| Mirza International Limited | ||||||
| Ratings continues on ‘Watch Developing’ | ||||||
| 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 ratings on the bank facilities of Mirza International Limited (MIL) continues on 'Rating Watch with Developing Implications’.
The ratings were placed on watch, following the announcement of the proposed corporate structuring of MIL and amalgamation of RTS Fashions Pvt Ltd with MIL, which has been approved by the board of directors. The domestic business of MIL, which comprised around two-thirds of revenue in fiscal 2022, will be demerged into a new entity -- Redtape Ltd wherein the shareholding of MIL will be mirrored.
Company had received NCLT approval on Feb 21, 2023 regarding the demerger of domestic business of MIL and amalgamation of RTS Fashions Pvt Ltd with MIL completing all necessary terms and conditions. Going forward, MIL will act as an operating company for the export business while Redtape Ltd (shareholding will be mirrored) will act as an operating company for domestic business.
However, the ratings continue on watch as CRISIL Ratings is holding discussions with the management, seeking; operational, managerial and financial linkages between MIL and the proposed entity; and division of assets and liabilities between them. CRISIL Ratings will remove the ratings from watch and take a final action once clarity on above aspects is received.
The ratings continue to reflect the established market position of MIL, backed by extensive experience of its promoters and management in the leather footwear industry, the integrated business operations and healthy operating performance in the domestic retail segment, aided recovery in the international segment. These strengths are partially offset by exposure to volatility in foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of MIL and its subsidiaries as all the entities are engaged in the same business and have common promoters. The discounted bills of Rs 75 crore as on March 31,2022, have been treated as debt.
Please refer Annexure - List of a Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of promoters, established market position and integrated operations The four-decade-long experience of the promoters has enabled MIL to achieve a significant market position in the domestic leather footwear market. The company has diversified presence across multiple channels, including owned and franchiseebased retail outlets, multi-brand retail stores (such as Shoppers Stop and Lifestyle) and ecommerce websites (such as Amazon and Flipkart). MIL sells footwear, apparel and accessories, majorly under the RedTape, Mode and Bond Street brands in the domestic market. Also, it undertakes make-to-order contracts for various reputed brands in the overseas market.
The operations are backward integrated, with an in-house tannery enabling conversion of raw hide into finished hide and thus enhancing quality control. The company is likely to sustain its strong market position over the medium term, backed by strong growth in the domestic retail business and expected rise in export revenue.
Healthy operating performance in the domestic market and recovery in the international business: Revenue has surpassed the pre-pandemic level and grew by 49% in first half of fiscal 2023, driven by healthy demand in the domestic market and gradual recovery in overseas markets. Healthy revenue in the domestic market is supported by steady increase in retail stores and established brands.
Weakness:Vulnerability to fluctuations in forex rates Business operations involve importing raw materials, such as cow hide, which is not available in India. Furthermore, exports account for 30-35% of revenue, which exposes the company to volatility in forex rates. However, MIL has a policy of entering forward contracts to cover 100% of its exports and imports are also hedged |
Liquidity: AdequateCash and cash equivalents stood at Rs 29 crore as on Sep 30,2022. Utilisation of the working capital limit has been modest. Cash accrual of Rs 100-150 crore projected per annum should comfortably /meet the moderate capital expenditure (capex), incremental working capital and debt obligation over the medium term. |
About the Company MIL was incorporated in 1979 as a private limited company by Mr Irshad Mirza (chairman) and got reconstituted into a public limited company in fiscal 1994, following a public issuance of shares. The company manufactures footwear and finished leather apparel and sells products under its RedTape, Mode, Bond Street and Oaktrak brands. It has an established position in the domestic footwear market and earns 30-35% of revenue from exports. The company sells 90% of footwear under customers' brands and 10% under its RedTape brand. It mainly exports to the UK.
For the nine months ended December 31, 2022, the company reported revenue from operations and profit after tax of Rs 1560 crore and Rs 131 crore, respectively, as against Rs 1234 crore and Rs 83 crore, respectively, in the corresponding period of the previous fiscal. |
Key Financial Indicators(consolidated*)
*These numbers are adjusted by CRISIL Ratings and do not match directly with the numbers reported by MIL |
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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 25-Apr-2023 in line with the lender-wise facility details as on 07-Feb-2023 received from the rated entity.
Criteria Details
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