Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 250.00 ACUITE AA- | Stable | Reaffirmed -
Total Outstanding 250.00 - -
 
Rating Rationale

­Acuité has reafiirmed the long-term rating of ACUITE AA-’ (read as ACUITE double A minus) on the Rs 250.00 Cr bank facilities of Gloster Nuvo Limited (GNL). The outlook is ‘Stable’.

Rationale for Rating Reaffirmation

The rating reaffirmation takes into account the healthy financial risk profile and adequate liquidity Position. Financial risk profile of the group is healthy marked by low gearing, strong net worth & coverage indicators. The Total Tangible net worth stood at Rs. 815.86 Cr as on 31st March 2023 as against Rs. 784.33 Cr a year earlier. Debt to Equity ratio stood low at 0.09 times in FY 2023.Interest coverage ratio stood comfortable at 51.97 times for FY2023 and Debt Service coverage ratio stood strong at 43.87 times for FY2023. Group generated cash accruals of Rs. 90 crore for FY2023 as against nil obligation. Current Ratio stood at 2.88 times as on 31 March 2023. Cash and Bank Balances of  Group stood at Rs 10.22 crore
Operating revenue of the group stood at Rs 324.47 crore in H1 FY 24 as against Rs 373.68 crore in H1 FY 23 which is ~15 percent lower which is on account of volatility of price(volume sale remains more or less same). Operating margin  stood at 10.41 percent in H1FY24 as against 12.13 percent in H1FY23.
The rating is constrained on account of high working capital requirement of operations and Dip in H1 FY 24. Acuité believes that the group’s ability to grow its scale of operations and profitability while maintaining a healthy capital structure remains a key rating indicator.

 

About Company
­Gloster Nuvo Ltd was formed in January 2020 to set  up an integrated jute mill at  Bauria, Howrah. it is expected to complete the set up by Q4 FY 24
 
About the Group
­Gloster Limited has following fully owned subidiaries.Together with these subsidiaries Gloster Limited is referred as Gloster Group.  
Gloster Lifestyle Limited(GLL), Gloster Specialties Limited(GSL), Gloster Nuvo Limited(GNL), Network Industries Limited(NIL) and Forte Gloster Industries Limited(FGIL)
 
Unsupported Rating
­Not Applicable
 
Analytical Approach

Extent of Consolidation
•Full Consolidation
Rationale for Consolidation or Parent / Group / Govt. Support
­cuité has consolidated the business and financial risk profiles of Gloster Ltd (Gloster), Gloster Lifestyle Limited(GLL), Gloster Specialties Limited(GSL), Gloster Nuvo Limited(GNL), Network Industries Limited(NIL) and Forte Gloster Industries Limited(FGIL).The consolidation is in view of GLL, GSL, NIL, GNL and FGIL being fully owned subsidiaries of Gloster.
Key Rating Drivers

Strengths
­Sound business profile marked by vintage and strong market position
Gloster Limited has an operational record of around hundred years as the company is operational since 1923. In 1954, Kolkata based Bangur family acquired the company. The group caters to both domestic and overseas markets such as USA, European Union, Middle East  countries,  Australia,  Japan  among  others.  The company  has  three  major  product segments namely Hessian & sacking, Yarn, and diversified jute products. Government sacking contributes nearly 30 percent of total revenue which is a regulated business. The group has wide product profile which caters to various industries such as FMCG, Agricultural products, Fashion Textile etc. The current management has more than six decades of experience in the jute business.
The group has undertaken a large expansion plan in GNL to enhance its production capacity. In Phase I, group will add a capacity of 92 tons per day envisaging a capex of Rs 252 Cr. which was earlier expected to be operational by Q4FY23 but currently the phase I commissioning date is extended to Q3FY24 as the company faced difficulties in procuring plant and machinery from Thailand. In Phase II, the group will add another capacity of 46 tons per day involving a capex of Rs 61 Cr. The capacity in Phase II is expected to be operational by Q4FY24. Acuité expects the group to record healthy revenue growth over the medium term backed by capacity addition and healthy order flow from the overseas markets.


Financial Risk Profile
Financial risk profile of the group is healthy marked by low gearing, strong net worth & coverage indicators. The Total Tangible net worth stood at Rs. 815.86 Cr as on 31st March 2023 as against Rs. 784.33 Cr a year earlier. Increase in net worth is on account of Profit accretion.
 Group follows conservative leverage policy marked by its low gearing. Debt to Equity ratio stood at 0.09 times in FY 2023 as against 0.01 times in FY 22.Interest coverage ratio stood comfortable at 51.97 times for FY2023 as against 107.66 times in FY2022. Debt Service coverage ratio stood strong at 43.87 times for FY2023 as against 39.97 times in FY2022.
Total outside liabilities to total net worth (TOL/TNW) stood at 0.27 times as on FY2023 vis-à-vis 0.22 times as on FY2022. Debt-EBITA stood at 0.67 times as on 31st March 2023 as against 0.07 times as on 31st March 2022. The Net Cash Accruals to Total debt stood at 1.23 times as on FY2023 and 9.62 times for FY2022. Interest coverage ratio stood comfortable at 51.97 times for FY2023 as against 107.66 times in FY2022. Debt Service coverage ratio stood strong at 43.87 times for FY2023 as against 39.97 times in FY2022.
Total outside liabilities to total net worth (TOL/TNW) stood at 0.27 times as on FY2023 vis-à-vis 0.22 times as on FY2022. Debt-EBITA stood at 0.67 times as on 31st March 2023 as against 0.07 times as on 31st March 2022. The Net Cash Accruals to Total debt stood at 1.23 times as on FY2023 and 9.62 times for FY2022.


Business diversification plan
The group is planning to enter into industrial cable business through FGIL. The group had acquired FGIL from NCLT against a consideration of Rs 72 Cr. The group had undertaken a capex plan of Rs 79 Cr to upgrade and modernize the manufacturing facility of FGIL. This will diversify the group’s overall business profile and improve the revenue mix.

Foray into the bag business
On land owned by FGIL, Gloster Ltd plans to set up a bag facility with a daily capacity of 1 lac bags for a capex of 35 crore to be funded by bank loans totalling 10 crore and rest internal funding. The project should be finished by Q4FY24. As the management is the same, the group is developing the jute project on the surplus land owned by FGIL; FGIL will construct the infrastructure, which subsequently would be leased out to Gloster Ltd

Weaknesses
­Agriculture-based Industry
Jute is an agricultural product, and its supply is highly dependent on weather conditions. The dependency leads to variations in prices and quality from season to season. Considering raw material cost is a major component of the total cost, any price rise affects the profitability of jute companies.

Working capital operations
Group has improved yet high working capital requirements as evident from gross current assets (GCA) of 114 days in FY2023 as compared to 103 days in FY2022. High Working capital requirement is on account of high Inventory Days and receivable days. Inventory days stood at 87 days in FY 23 (82 days in FY22). Debtor days stood at 20 days in FY2023 as against 15 days in FY 22.
Rating Sensitivities
­Timely completion of planned capital expenditure
Substantial improvement in profitability margins along with sustained revenue growth
Any unwarranted regulatory changes
Timely completion and effective leveraging of capex resulting into positive improvement and scale of operations
 
All Covenants
Not Applicable
 
Liquidity Position
Adequate
­Group has adequate liquidity marked by net cash accruals to its maturing debt obligations, current ratio, cash and bank balance. Group generated cash accruals of Rs. 90 crore for FY2023 as against nil obligation. Current Ratio stood at 2.88 times as on 31 March 2023 as against 4.25 times in the previous year. Cash and Bank Balances of group stood at Rs 10.22 crore. Further Group has fixed deposits of Rs 19.15 crore for FY 23.
 
Outlook:Stable
­Acuite believes that the Gloster group will benefit over the medium term from the promoters’ vast experience in the business of jute products and robust financial risk profile. The outlook may be revised to ‘Positive’ if the group sustains their revenue growth with sustained improvement in profit margin. Conversely, the outlook may be revised to ‘Negative’ if the group witnesses significant deterioration in financial risk profile or liquidity profile due to higher than expected debt led capex plan.
 
Other Factors affecting Rating
­None 
 

Particulars Unit FY 23 (Actual) FY 22 (Actual)
Operating Income Rs. Cr. 717.26 752.31
PAT Rs. Cr. 54.39 65.28
PAT Margin (%) 7.58 8.68
Total Debt/Tangible Net Worth Times 0.09 0.01
PBDIT/Interest Times 51.97 107.66
Status of non-cooperation with previous CRA (if applicable)
­Not applicable
 
Any Other Information
None
 
Applicable Criteria
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm

Note on Complexity Levels of the Rated Instrument
­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
17 Nov 2023 Proposed Long Term Loan Long Term 68.00 ACUITE AA- | Stable (Reaffirmed)
Term Loan Long Term 42.00 ACUITE AA- | Stable (Reaffirmed)
Term Loan Long Term 140.00 ACUITE AA- | Stable (Reaffirmed)
27 Mar 2023 Proposed Long Term Loan Long Term 90.00 ACUITE AA- | Stable (Reaffirmed)
Proposed Long Term Loan Long Term 20.00 ACUITE AA- | Stable (Reaffirmed)
Term Loan Long Term 140.00 ACUITE AA- | Stable (Reaffirmed)
07 Jun 2022 Proposed Long Term Loan Long Term 230.00 ACUITE AA- | Stable (Assigned)
Proposed Long Term Loan Long Term 20.00 ACUITE AA- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)
Complexity Level Rating
Not Applicable Not Applicable Proposed Long Term Loan Not Applicable Not Applicable Not Applicable 68.00 Simple ACUITE AA- | Stable | Reaffirmed
State Bank of India Not Applicable Term Loan Not available Not available Not available 140.00 Simple ACUITE AA- | Stable | Reaffirmed
HDFC Bank Ltd Not Applicable Term Loan Not available Not available Not available 42.00 Simple ACUITE AA- | Stable | Reaffirmed

Contacts




About Acuité Ratings & Research

© Acuité Ratings & Research Limited. All Rights Reserved.www.acuite.in