| VKC Footwear International Private Limited | ||||
| Rating reaffirmed at 'CRISIL BBB / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Stable’ rating on the long-term bank facilities of VKC Footwear International Private Limited (Footwear International, part of the Walkaroo Group).
The rating continues to reflect the Walkaroo group's established market position in the domestic footwear industry, efficient working capital management and strong financial risk profile. These strengths are partially offset by exposure to intense competition and susceptibility of operating profitability to volatility in raw material prices. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Walkaroo International Pvt Ltd, U4IC International Pvt Ltd, VKC Footwear International Pvt Ltd, Veekesy Elastomers Pvt Ltd, Veekesy Sandals India Pvt Ltd, VKC Footcare India Pvt Ltd, and Ferroro Vinyl Technologies Pvt Ltd. All the companies, collectively referred to as the Walkaroo group, operate in similar businesses, have a common management team, and have significant operational linkages.
Unsecured loans from the promoters 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:
Walkaroo group’s promoters have experience of over 30 years in the footwear industry, which has helped the group become one of the largest manufacturer of polyurethane (PU) foot wear in India and establish its brands Wakaroo and Others. The group has evolved its product profile over the years; from Hawaii and polyvinyl chloride footwear to PU and ethylene vinyl acetate (EVA) footwear. It has diversified presence outside southern India by setting up manufacturing units in Haryana, Madhya Pradesh and Gujarat. The group has around 19 sales depots across 14 states in India and a network of more than 400 dealers. This has resulted in steady revenue growth over the past four years. The revenues grew from Rs.1150.8 Crores in fiscal 2017 to Rs.1446.9 Crores in fiscal 2020.
The efficient working capital management is reflected in gross current assets (GCAs) of 116 days as on March 31, 2020. The group's established brand and high bargaining power allows it to limit credit to 25 days to dealers. Ready availability of raw material and high demand for products have led to moderate inventory of around 65 days. Efficiently managed working capital results in low working capital debt. The gross current asset days are expected to remain in the same line over the medium term.
As on March 31, 2020, networth was Rs 448.61 crore and gearing and total outside liabilities to adjusted networth were comfortable at 0.4 time and 0.7 time, respectively. For fiscal 2021, the gearing and total outside liabilities to adjusted networth are estimated to be at 0.25 time and 0.51 time respectively. The gearing is expected to remain below 1 time over the medium term backed by healthy accrual to fund incremental working capital and moderate capital expenditure (capex). Debt protection metrics were healthy, with interest coverage and net cash accrual to total debt ratios at 9.28 times and 0.54 time, respectively, for fiscal 2020. For fiscal 2021, interest coverage and net cash accrual are estimated to be at 12.56 times and 0.33 times. The ratios are expected to remain stable due to healthy operating margin and low debt.
Weaknesses:
Walkaroo Groups operating margin is susceptible to volatility in raw material prices, as its raw material prices are linked to crude prices. The operating margin has fluctuated between 11-15% over the last three years. The group's profitability will remain vulnerable to sharp and adverse volatility in raw material prices over the medium term.
Walkaroo group faces intense competition from various established brands and unorganised players in the low-cost footwear segment. Though the Walkaroo brand has a strong foothold in south India, the group’s pricing flexibility will remain restricted by competition. |
Liquidity: Strong Walkaroo Group enjoys strong Liquidity driven by expected cash accruals of Rs.106-114 crore per annum in FY22 and FY23, against long term repayment obligations of around Rs.35 crore and Rs.43 Crores, respectively. Cash and cash equivalents were at Rs.22.34 crores as on March 31, 2020. The group also has access to fund based limits of Rs.135 crore, utilized to the tune of 54% on an average over the 12 months ended September 2020. With a gearing of 0.54 times, the group has sufficient gearing headroom, to raise additional debt to meet its capex requirement. The group has paid out dividends of Rs.82 Crores in fiscal 2021, and any large such dividend payout in future will remain monitorable. |
Outlook: Stable CRISIL Ratings believes Walkaroo Group will continue to benefit over the medium term from its established market position and strong financial risk profile.
Rating sensitivity factors Upward factors
Downward factors
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About the Group The Walkaroo group, set up by Mr. V. Noushad has got a capacity to manufacture around 4.5 Lakhs pairs of footwear per day. The group manufactures PU footwear, mostly sandals, slippers, and floaters, for men, women, and children under the brands Walkaroo, Blue Tyga, Toes & Togitoes and others.
It has manufacturing units at Calicut and Malappuram in Kerala; Bengaluru and Mysuru in Karnataka; Coimbatore in Tamil Nadu; Nellore in Andhra Pradesh; Vapi in Gujarat; and Bahadurgarh in Haryana. |
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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 various bank facilities | ||||||||||||||||||||||||||||||
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