| Zodiac Clothing Company Limited | ||||||
| 'CRISIL BB/Stable/CRISIL A4+' assigned to Bank Debt | ||||||
| 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 assigned its ‘CRISIL BB/Stable/CRISIL A4+’ ratings to the bank facilities of Zodiac Clothing Company Limited (ZCCL; part of zodiac group).
The rating reflects the group’s long-standing market presence in men's clothing and clothing accessories & extensive industry experience of the promoter’s family and moderate capital structure. These strengths are partially offset by its exposure to volatility in raw material prices and higher fixed costs and working capital intensive operations. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of ZCCL along with its wholly owned subsidiary, i.e., Zodiac Clothing Co. S.A. and step- down subsidiaries, i.e., Zodiac Clothing Bangladesh Limited, Zodiac Clothing Company Inc. (USA), Zodiac Clothing Co. (UAE) LLC. and Zela Technologies, Inc (USA) collectively referred to as ‘Zodiac Group’.
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: Long standing market presence in men's clothing and clothing accessories and extensive industry experience of the promoter’s family: ZCCL along with its subsidiaries has long standing market presence in men’s clothing & clothing accessories since its inception in 1954, initially commenced its business by manufacturing neckties for men. It has well-known brands ‘“Zodiac”- men’s formal wear, “ZOD!”- party/club wear and “Z3”- popular for its relaxed casual wear, all three catering to men’s clothing & accessories. Further, ZCCL also benefits from its promoter’s family, i.e. Noorani family, having experience of over 7 decades in men’s apparel industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers.
Moderate capital structure: The group’s capital structure has been at moderate healthy level due to limited reliance on external funds yielding gearing of 0.35 times and total outside liabilities to adj tangible networth (TOL/ANW) of 0.49 times for year ending on 31st March 2024. The group’s financial risk profile is expected to remain comfortable over the medium term. Promoters have infused equity in past fiscals which has supported the capital structure of the group. Further, group also has cash and cash equivalents of Rs 72 crore providing financial flexibility.
Weakness: Exposure to volatility in raw material prices and higher fixed costs: Volatility in raw material, i.e., cotton and wool prices led to fluctuation in operating profitability. For instance, in the past, material increases in the price of wool and cotton (owing to increase in minimum support price in India) had resulted in operating losses, due to low top line, which remains insufficient to absorb the operating expenses in past three fiscals; albeit partly offset by the company’s ability to addition of new stores and pass-on the increases to customers. Additionally, group’s other costs, i.e., employee costs and other fixed costs are higher which has led to EBITDA loss over the past few years. While group has been focused on reducing the costs, this will remain monitorable and will remain key rating sensitivity factor.
Working capital intensive operations: Its intensive working capital management is reflected in its gross current assets (GCA) of around 300 days as of March 31, 2024. Its large working capital requirements arise from its high debtor and inventory levels. It is required to extend the long credit period. Furthermore, due to its business need, it holds large work in process & inventory. GCA days are expected to remain in a similar range over the medium term. |
Liquidity: Stretched Liquidity is marked by cash loss in fiscal 2024. Group has no repayment obligations as on date. Bank limit utilization for fund-based limit is around 69.3% for last 12 months ending March 2024. Group has cash and cash equivalents of Rs 72 crores (Encumbered & unencumbered) as on March 31,2024. No major debt funded capex plans over the medium term. |
Outlook: Stable CRISIL Ratings believe the group will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Group ZCCL was initially set up as partnership firm in 1954 and later incorporated as limited company in 1984. ZCCL along with its wholly owned subsidiary & step-down subsidiaries, is engaged in manufacturing of readymade garments, primarily catering to men’s clothing such suits, shirts, trousers, and club and casual wear, as well as accessories comprising belts, cufflinks, handkerchiefs, pochettes, and socks. ZCCL market’s its products through its own brands, “‘Zodiac”- men’s formal wear, “ZOD!”- party/club wear and “Z3”- popular for its relaxed casual wears.
ZCCL is listed on Bombay Stock Exchange (BSE) and National Stock Exchange of India Ltd. (NSE). Currently, its operations are headed by Mr. Anees Yusuf Noorani (Chariman & Director), Mr. Salman Yusuf Noorani (Vice Chairman & Managing Director), Mr. Mohamed Awais Jehangir Noorani (Whole-time Director) and Mr. Adnan Salman Noorani (Whole-time Director). |
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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