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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 17.00 | ACUITE B+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 8.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 25.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE B+’ (read as ACUITE B plus) on the Rs. 17 Cr bank facilities and the short-term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs.8.00 Cr bank facilities of Indoline Industries Private Limited (IIPL). The outlook is ‘Stable’.
Rationale for the rating The reaffirmation in the rating reflects the long track record of operations of the company & experienced management, adequate liquidity position and business relations with branded OEMs like Godrej. The rating, however, continues to remain constrained on account of Improved yet Intensive Working Capital Management and negative margins, average financial risk profile and Stiff competition with the peers. |
| About the Company |
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Maharashtra-based, IIPL was incorporated in 1987. The company is engaged in manufacturing of all types of wooden furniture including modular kitchens, wardrobes, bedroom furniture, hotel and household furniture. The company also offers various finishes like Laminate, Acrylic, UV Lacquer, PU Lacquer, PVC Membrane, Veneer, Solid Wood and Back Painted Glass etc. The company is promoted by Mr. Husain Sultan Ali Nensey, Mr. Saif Husain Nensey, Mrs. Nissa Husain Nensey and Mr. Adnan Latif Nensey. The manufacturing facilities are located at Ambad, Nashik and Dindori.
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| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profile of IIPL to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Experienced management and established track record of operations
The promoters, Mr. Husain Sultan Ali Nensey, Mr. Saif Husain Nensey, Mrs. Nissa Husain Nensey and Mr. Adnan Latif Nensey, have over three decades of experience in the said line of business. The extensive experience, coupled with long track record of operations, has enabled the company to forge healthy relationships with customers and suppliers. The company exports to countries such as UAE, Kenya and USA, however export accounts for only 10 percent of the total sales. Acuité believes that the business is expected to benefit from its established presence in the aforementioned industry and the directors’ demonstrated ability.
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| Weaknesses |
| Intensive Working Capital Management
IIPL’s working capital operations are intensive marked by Gross Current Asset days (GCA) of 197 days in FY 2022 against 217 days in FY2021. The inventory days stood at 112 days in FY 2022 against 131 days in FY2021. The debtors’ days stood at 81 days in FY 2022 against 78 days in FY2021. The creditors’ days stood at 193 days in FY 2022 against 235 days in FY2021. However, working capital limits remains utilized at 62.43 percent for last 10 months ended February 2023. Stiff competition from peers The company is facing immense competition from its peers, as a result of which the company is unable to improve its margins even when there is slight improvement in the operating revenue. Due to the aforesaid factor, the overall profitability of the company is being impacted as a whole. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
| Current position of cash accruals is at Rs.1.44 crore in FY2022 against moderate repayment obligations of Rs.0.99 crore, further. Unencumbered cash and bank balances stood at Rs.0.14 crore as on March 31, 2022 against Rs.0.99 crore as on March 31, 2021 with a current ratio of 0.93 times in the same period. Liquid investments stood at Rs.0.41 crore as on March 31, 2022. However, working capital limits remains utilized at 62.43 percent for last 10 months ended February 2023. |
| Outlook: Stable |
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Acuité believes that IIPL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and long track record of operations. The outlook may be revised to 'Positive' if the company demonstrates substantial and sustained growth in its revenues from the current levels while maintaining its margins. Conversely, the outlook may be revised to 'Negative' in case the company registers lower than expected growth in revenues and profitability or deterioration in its working capital management or larger-than-expected debt- funded capex leading to deterioration in its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| About the Rated Entity - Key Financials |
| Note: The 7.5% cumulative reedemable preference shares of Rs. 8.39 Cr. is treated as quasi equity in FY22 onwards as the tenure of CRPS is 20 Years and hence the funds will remain in the business for a long horizon. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 74.88 | 54.63 |
| PAT | Rs. Cr. | (0.01) | 0.18 |
| PAT Margin | (%) | (0.01) | 0.32 |
| Total Debt/Tangible Net Worth | Times | 2.27 | 2.45 |
| PBDIT/Interest | Times | 2.55 | 2.78 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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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.
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