| Mirza International Limited | ||||||
| Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2+' | ||||||
| Rating Action | ||||||
| ||||||
| 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 A-/Stable/CRISIL A2+’ ratings on the bank loan facilities of Mirza International Ltd (MIL).
The reaffirmation in ratings reflects MIL’s strong financial financial risk profile along with adequate liquidity and extensive experience of the promoters and integrated operations. These strengths are partially offset by moderation in business risk profile and vulnerability to fluctuations in forex rates.
The company reported Rs. 144 crores of operating income in the first quarter of this fiscal which is up 12.5% Y-o-Y driven by ~14% growth in footwear segment (contributing ~77% of the revenue) and ~8% in tannery business (contributing ~23% of the revenue). Going forward with the expected pickup in export demand, the company is expected to report better revenues this fiscal.
In Q1FY25 operating margins improved to 7.3%, slightly higher than 7.2% in Q1FY24 which was mainly due to lower raw material cost even as other costs increased which indicates early signs of recovery with stabilizing material prices. With leather prices now normalizing, gross margins are expected to improve further in FY25. This stabilization, along with the company's cost management efforts, is likely to push operating margins into the 8-9% range over the medium term.
The company’s financial risk profile stood strong as the company has a strong capital structure with negligent long-term debt on books and a healthy net worth of Rs 547 crore as on March 31, 2024 which is expected to cross Rs. 600 crore by fiscal 2027. Further, the company’s financial risk profile is expected to remain healthy going forward as gearing is expected to remain below 0.15 times and TOL/ANW to remain below 0.45 times in the medium term. Company continues to maintain healthy debt protection metrics with an interest coverage of ~4.79 times & NCA/AD of 0.52 times as on Mar 31, 2024. Going forward also, the gearing levels and debt protection metrics are expected to remain strong due to healthy cash accruals over the medium term no major debt funded capex plans and gradual repayment of long-term debt |
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 42 crore as on March 31, 2024 have been treated as debt.
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:
The operations are backward integrated, with an in-house tannery enabling conversion of raw hide into finished hide and thus enhancing quality control.
Weaknesses:
Scale up in operations and improvement in operational margin considering the possible impact of slowdown in export market demand remains a key monitorable.
|
Liquidity: Adequate Adequate liquidity profile of MIL is supported with the company having liquid surplus of ~Rs. 18 crores as on March 31, 2024. Further, the company has access to WC limits of Rs. 120 crore which have been utilized at an average of only 42% over the past 14 months ending June 2024. Also, the company has capex plans of ~Rs. 10-15 crore per annum in lieu of general maintenance which is expected to be funded from internal accruals of ~Rs. 45-55 crore with no repayment obligation over the same period. |
Outlook: Stable MIL will continue to benefit from its moderate market position across product categories and experienced promoters. The financial risk profile should remain strong, driven by nil long-term debt, high financial flexibility, and moderate capex. |
Rating sensitivity factors Upward factors:
Downward factors:
|
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 private label brands - Thomas Crick, Off The Hook London & Oaktrak in the international market. 86% of the revenue comes from exports. MIL exports top 22 countries with more than 75% exports to the UK & US. |
Key Financial Indicators
|
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Includes Packing Credit & Bill Discounting as sublimit of Rs.21 cr each, Letter of Credit & Bank Guarantee as sublimit of Rs.10 cr each |
Annexure - List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
|
Criteria Details
|