| Riba Textiles Limited | ||||||
| Ratings 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 reaffirmed its ‘CRISIL BBB/Negative/CRISIL A3+’ ratings on the bank facilities of Riba Textiles Limited (RTL).
The ratings continue to reflect the established presence of RTL in the textile industry, comfortable capital structure of the company and its efficient working capital management. These strengths are partially offset by susceptibility to volatility in raw material prices and exposure to geographical concentration in revenue. |
Key Rating Drivers & Detailed Description Strengths Established market position The promoters have experience of over two and a half decades in the textiles industry; their strong understanding of the market dynamics and healthy relationships with customers and suppliers have helped the company attain sales of Rs 157.6 crore over the nine months through fiscal 2022 against Rs 124.2 crore in the corresponding period of the previous fiscal. Sales will likely increase to Rs 215 crore in fiscal 2022 from Rs 190 crore in fiscal 2021 and are expected at over Rs 250 crore on account of increased volume, as the company has added some looms that shall support business growth.
Comfortable capital structure Networth and gearing are estimated at around Rs 74.00 crore and below 0.80 time, respectively, as on March 31, 2022 (against Rs 70.00 crore and 0.80 time, respectively, a year earlier). Debt protection metrics are expected to be moderate on account of low profitability; interest coverage and net cash accrual to total debt ratios are estimated at 3.7 times and 0.18 time, respectively, in fiscal 2022 (against 4.2 times and 0.18 time, respectively, in fiscal 2021).
Although the company has not planned any major, debt-funded capital expenditure (capex) over the medium term, any such capex that weakens the capital structure and has significant repayment will remain a key rating sensitivity factor.
Efficient working capital management Gross current assets (GCAs) are estimated at a moderate 134 days as on March 31, 2022, driven by receivables and inventory of 84 and 38 days, respectively. The company maintains inventory of 30-45 days only in order to mitigate the risk of volatility in raw material prices. The working capital cycle will remain efficiently managed over the medium term, with GCAs at 110-115 days.
Weaknesses Susceptibility to volatility in raw material prices RTL is exposed to volatility in the prices of the raw material, cotton yarn. As raw material cost comprises more than 60% of the operating income, the company remains susceptible to increase in input prices, which has put pressure on operating profitability. The earnings before interest, tax, depreciation and amortisation (EBITDA) margin moderated to 8.1% in fiscal 2021 from 9.4% in fiscal 2020, which is expected to moderate by another 100 basis points and is estimated at around 7% in fiscal 2022. Improvement in profitability will remain a key monitorable over the medium term.
Geographical concentration in revenue Though the clientele is fairly diversified, with no single customer contributing to more than 7% of the total business, there is geographical concentration, with 75% of the revenue generated only from the top five countries. Any disruption in a particular economy can significantly impact the business risk profile of the company. |
Liquidity: Adequate Cash accrual, expected at Rs 13-15 crore per annum, will sufficiently cover yearly debt obligation of Rs 7-10 crore in fiscals 2023 and 2024; the surplus cash will aid financial flexibility. However, cash accrual was modest in fiscal 2022 because of low profitability and will be insufficient vis-à-vis debt obligation of around Rs 12 crore; the cash mismatch will be met through debt. Bank limit was utilised at around 78% on average over the 12 months through February 2022. Cash and bank balance stood at Rs 1.25 crore as on September 30, 2021. |
Outlook: Negative The operating margin of RTL will remain under pressure over the medium term because of increasing raw material prices. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1989, RTL manufactures and exports terry towels. It offers spa, yarn dyed, plain dyed, printed border and embroidered towels as well as bath robes. The manufacturing facility is in Sonipat, Haryana, with capacity of 8,000 tonne per annum. The products are sold under the Pashima Cotton, CASA FINA, Duex Fils, Jamaican Jax, Notting Hill, Hard Castle and Leeds UK brands. |
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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Export Packing Credit | 40 | State Bank of India | CRISIL BBB/Negative |
| Foreign Exchange Forward | 3 | State Bank of India | CRISIL A3+ |
| Long Term Loan | 29 | State Bank of India | CRISIL BBB/Negative |
| Proposed Long Term Bank Loan Facility | 4.5 | Not Applicable | CRISIL BBB/Negative |
This Annexure has been updated on 08-Feb-23 in line with the lender-wise facility details as on 17-Jan-23 received from the rated entity.
Criteria Details
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