| TCNS Clothing Co. Limited | ||||||
| Rating outlook revised to 'Stable'; 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 revised its outlook on the long-term bank facilities of TCNS Clothing Co. Limited (TCNS) to ‘Stable’ from ‘Positive’ while reaffirming the rating at ‘CRISIL AA-’. Short term rating has been reaffirmed at ‘CRISIL A1+’
The revision in outlook factors in lower than expected operating profitability in Q3 of FY24, where the company has reported negative EBIDTA margins (including other income) of ~3% (Post Ind AS) as against expected profits on account of festive demand in Q3 of FY24, largely on account of muted market demand and alignment of dormancy norms with Aditya Birla Fashion Retail Limited [ABFRL, rated 'CRISIL AA+/Negative/CRISIL A1+’]. Reported EBIDTA margins (including other income) have been negative by ~18% till December 2023. Going ahead as well, operating margins are expected to be under pressure for 2-3 more quarters on account of similar reasons. Margins are expected to witness some improvement from H2 of FY25 after complete re-alignment with policies of ABFRL. The operations of the company shall continue to remain benefitted of parental support. Due to operational losses, debt protection metrics remain subdued. Sustained improvement in operating margins amid steady operating income would therefore remain a key monitorable.
The ratings reflect strategic importance to ABFRL as product offering gets strengthened with entry into premium ethnic wear and its strong operational and management support from the parent along with estabilished market position of TCNS. These strengths are partially offset by working capital intensive operations of the company and low operating profitability. |
Analytical Approach CRISIL Ratings continues to apply its parent notch-up criteria to arrive at the rating of TCNS. This is because the company became a subsidiary of ABFRL in September 2023 and is likely to be merged with it in the current fiscal. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity : Strong TCNS has strong liquidity as there are NIL term debt obligations to repay and the cash and cash equivalents are expected to be in range of Rs 18-20 crores over medium term. TCNS also has access to fund based limits of Rs 167 crores , which have been utilised to ~55% for last 12 months through September 2023 on average basis. Liquidity profile further remains supportive of strong financial support from parent ABFRL. CRISIL Ratings expects cash & cash equivalents and unutilized bank lines and strong parent support to be sufficient to meet the incremental working capital requirements. |
Outlook Stable The credit risk profile of TCNS shall continue to remain supportive of strong support of parent ABFRL. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company TCNS was set up in December 1997 by Mr OS Pasricha and Mr AS Pasricha and is a professionally managed company listed on the Bombay Stock Exchange and the National Stock Exchange. It manufactures, and retails ethnic and fusion womenswear through exclusive stores, multi-brand outlets, and chains such as Lifestyle, Reliance Trends, Pantaloons, and Shoppers Stop. TCNS has 648 exclusive stores in more than 100 cities. |
About the Parent ABFRL is the apparel retail venture of the Aditya Birla group, which merged the Madura division (formerly, a division of Aditya Birla Nuvo Ltd) with the erstwhile PFRL on January 9, 2016, with appointed date of April 1, 2015; PFRL was renamed ABFRL subsequent to the merger. The Madura division holds leading brands while the departmental stores are under Pantaloons. ABFRL acquired Forever 21 in India in 2016 to ramp up its fast fashion segment. As of March 2023, the company operated on a retail area of 10.8 million square feet with 3,546 brand outlets and 431 Pantaloons stores |
Key Financial Indicators
# as on Sep 30, 2023. *Break up not available in absence of complete schedules. |
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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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