| Rupa & Company 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 ratings on the bank loan facilities and commercial paper of Rupa & Company Limited (Rupa; part of the Rupa group) at ‘CRISIL AA-/Stable/CRISIL A1+’.
The ratings continue to reflect strong market presence and extensive industry experience of the promoter along with above-average financial risk profile. These rating strengths are partially offset by large working capital requirement and exposure to intensifying competition in the innerwear industry. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Rupa and its wholly owned subsidiaries, Euro Fashion Inners International Pvt Ltd (Euro), Imoogi Fashions Pvt Ltd (Imoogi), Rupa Bangaldesh Private Limited, Rupa Fashions Private Limited and Oban Fashions Pvt Ltd (Oban). This is because all these entities, together referred to as the Rupa group, have significant operational and financial linkages.
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: Strong market presence and extensive industry experience of the promoter: The group has established its position in the intensely competitive domestic hosiery industry. The promoter have extensive industry experience of more than five decades. Rupa benefits from strong brand recall in the premium and economy segments and has over 18 sub-brands that cater to the economy, medium, premium and super-premium segments. Acquisition of licence rights for certain products of French Connection Group PLC (FCUK brand) and Fruit of the Loom is expected to further support business risk profile.
Above-average financial risk profile: Capital structure continues to remain healthy marked by net worth of Rs.906 crore and gearing of less than 0.3 times in FY23. In the absence of any major debt funded capex plans along with moderate accretion to reserves, capital structure is expected to remain healthy over the medium term. Debt protection metrics continues to remain comfortable marked by interest coverage and net cash accruals to total debt (NCATD) of 3.94 times and 17% respectively as on 31st March, 2023.
Weaknesses: Large working capital requirement: Intense competition in the hosiery industry necessitates offering substantial credit to distributors and maintaining large inventory to minimise delays in delivery. Though, inventory management has improved considerably with focus on optimising production in line with sales patterns. However, the same remained high at around 169 days as on 31st March, 2023. Going forward, improvement in working capital management while sustaining moderate business risk profile will remain key rating sensitivity factor.
Exposure to intensifying competition in the innerwear industry and profitability exposed to volatile raw material prices: The innerwear market in India is dominated by the unorganised sector, despite the robust market potential for branded innerwear, leading to intense competition. Competition could also increase with the advent of other established foreign brands through the franchisee route, large domestic readymade garment manufacturers venturing into innerwear segments, and other players spending heavily on brand-building and product-positioning.
In FY23, increased yarn prices and revision in pricing along with steep competition in the industry has led to decline in revenue to Rs.1143 crore against Rs.1474 crore in FY22. Despite no major increment in fixed cost, EBITDA margin reduced to around 8% for full year FY23 from 18.3% a year back primarily due to reduced scale of operations and unfavorable raw material price movement. With expected resumption in scale of operations in the current year along with revised pricing and steady yarn prices, scale and margin are expected to resume to pre-covid levels, over the medium term. The same will remain key rating monitorable. |
Liquidity: Strong Bank limit utilisation is moderate at around 71.33 percent for the past eleven months ended June 2023. Cash accrual are expected to be over Rs 80 crore which are sufficient against term debt obligation of less than Rs.7 crore over the medium term. Current ratio are healthy at 2.53 times as on 31st March, 2023. Unencumbered liquid funds of more than Rs.180 crore as on 31st June, 2023 provides additional cushion to liquidity and sustenance of the same will remain key monitorable, over the medium term. |
Outlook: Stable The strong market position of the group and its established distribution network will continue to support business risk profile over the medium term. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group Incorporated in 1985, Rupa is promoted by Kolkata-based Agarwala brothers. The company manufactures knitted innerwear, casual wear and thermal wear for men, women and children. The Agarwala family has been in this business since 1968 through proprietorship and partnership firms. After incorporation, Rupa took over the business of Binod Hosiery, a partnership firm of the Agarwala brothers.
Euro, incorporated in 2005 in Mumbai, owns the Euro brand while Imoogi (set up in 2010 in Kolkata) owns the Femmora brand. Oban, incorporated in 2015, acquired the exclusive licence from FCUK to develop, manufacture and sell innerwear, socks, leggings and sleepwear under the FCUK brand in India, effective April 2016.
On January 5, 2022, all assets and liabilities pertaining to the super premium segment (FCUK and Fruits of the Loom) of OFPL has got transferred to Rupa along with all licences, approvals, contracts, deeds, statutory obligations and employees. OFPL will remain a subsidiary of Rupa and is currently engaged in trading of Yarn. |
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 – List of Entities Consolidated
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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 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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