| Walkaroo International Private Limited | ||||
| Rating 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 A-/Stable’ rating on the long-term bank facilities of Walkaroo International Private Limited (Walkaroo, 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 volatility in raw material prices. |
Analytical Approach For arriving at the ratings, CRISIL Ratings had combined the business and financial risk profiles of Walkaroo, U4IC International Pvt Ltd, VKC Footwear International Pvt Ltd, Veekesy Elastomers Private Limited, Veekesy Sandals India Pvt Ltd, Veekesy Footcare India Pvt Ltd, and Ferroro Vinyl Technologies Pvt Ltd. That's because these entities, collectively referred to as the Walkaroo group, have common promoters, are in the same line of business, and have significant operational, managerial and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and the analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Established market position in the domestic footwear industry The three-decade-long experience of the Walkaroo group’s promoters in the footwear industry has led to the group becoming one of the largest manufacturers of polyurethane (PU) footwear in India and has helped establish its brands, such as Walkaroo. The product profile has evolved over the years, from Hawaii and polyvinyl chloride footwear to PU and ethylene vinyl acetate footwear. The group has diversified its presence outside southern India by setting up manufacturing units in Haryana, Madhya Pradesh and Gujarat. It has increased its dealer network at pan India level, close to around 750 dealers as on March 31, 2022 (450 dealers a year ago) and because of which the company has been able to further penetrate into market, resulting in steady growth in revenues to over Rs.1700 crores expected for fiscal 2022 from Rs.1446 crores in fiscal 2020.
Efficient working capital management The working capital will remain efficiently managed, as reflected in estimated gross current assets (GCAs) of 90-100 days as on March 31, 2022. The group's established brand and high bargaining power allow it to limit credit to dealers to 30-45 days. Timely availability of raw material and high demand for products have led to moderate inventory of 60-70 days. Efficient working capital management results in low working capital debt. The GCAs are expected to remain at similar levels over the medium term.
Strong financial risk profile Networth is estimated at Rs 450-475 crore and gearing and total outside liabilities to adjusted networth ratio at 0.30-0.40 time and 0.65-0.75 time, respectively, as on March 31, 2022. The gearing is expected to remain below 1 time over the medium term, backed by healthy cash accrual to fund the incremental working capital requirement and moderate capital expenditure (capex). Debt protection metrics were healthy, indicated by estimated interest coverage and net cash accrual to total debt ratios of 9.60-9.70 times and 0.6-0.7 time, respectively, in fiscal 2022. The ratios are expected to remain stable on account of moderate operating margin and low debt.
Weaknesses Susceptibility to volatility in raw material prices Walkaroo group’s operating margin is susceptible to volatility in raw material prices, which are linked to crude prices; limited ability to pass on these prices to end consumers given the intense competition has led to volatile operating margin in range of 10-12% till fiscal 2021. Operating profit margin declined sharply in fiscal 2022 to around 4-4.5% from 10.1% in fiscal 2021, primarily driven by spike in prices of raw material and due to revision in GST rates on footwear below selling price of Rs.1000 from 5% to 12% in Q4 of fiscal 2022. While, the operating margin is expected to improve to 8-9% in fiscal 2023, backed by price revision done from April 2022, the operating margin will continue to be volatile and hence, key monitorable.
Exposure to intense competition The Walkaroo group faces intense competition from various established brands and unorganised players in the low-cost footwear segment. Furthermore, the business risk profile is constrained by price sensitivity of the target segment, which limits the ability to pass on any sharp increase in raw material prices to customers. Exposure to risks related to competitive designs, constant change in customer preferences and growing presence of international brands persists. This forces the group to continuously develop new designs to stay ahead of competition. Though the Walkaroo brand has a strong foothold in southern India, the group’s pricing flexibility will remain restricted on account of competitive pressure. |
Liquidity: Strong Walkaroo group has strong liquidity driven by expected cash accruals of Rs.95-100 crores per annum over the medium term, against repayment obligations of around Rs.12 crores and Rs.17 crores in fiscal 2023 and fiscal 2024, respectively. Walkaroo group’s fund-based limits of Rs.144 crores was utilized to the tune of 55% on an average over the 12 months ended March 2022. The group has capex plans of Rs.30-40 crores per annum over the next two year, which will be funded partly through debt. With an expected gearing of 0.3-0.4 times, Walkaroo group has sufficient gearing headroom, to raise additional debt to meet its capex requirement and incremental working capital requirements. The group had declared dividends of Rs.82 crores in fiscal 2021 and no major dividend is expected to be declared in fiscal 2022. However, any large dividend payouts will remain monitorable. |
Outlook: Stable The Walkaroo group will continue to benefit 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 capacity to manufacture around 5.4 lakh 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.
The manufacturing units are 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: |
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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 20 | State Bank of India | CRISIL A-/Stable |
| Cash Credit | 30 | The Federal Bank Limited | CRISIL A-/Stable |
| Proposed Fund-Based Bank Limits | 7.56 | Not Applicable | CRISIL A-/Stable |
| Term Loan | 1.06 | State Bank of India | CRISIL A-/Stable |
| Term Loan | 29.34 | The Federal Bank Limited | CRISIL A-/Stable |
| Term Loan | 6 | The Federal Bank Limited | CRISIL A-/Stable |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 20-Feb-23 received from the rated entity.
Criteria Details
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