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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 32.00 | ACUITE B- | Stable | Upgraded | - |
| Bank Loan Ratings | 10.00 | - | ACUITE A4 | Upgraded |
| Total Outstanding | 42.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuite has upgraded the long term rating of 'ACUITE B-' (read as ACUITE B minus) from 'ACUITE D' (read as ACUITE D) and 'ACUITE C' (read as ACUITE C) on the Rs. 32.00 Cr. bank facilities of O C Sweaters LLP. The outlook is 'Stable'.
Acuite has upgraded the short term rating to 'ACUITE A4' (read ACUITE A Four) from 'ACUITE D' (read as ACUITE D) on the Rs. 10.00 Cr. bank facilities of O C Sweaters LLP. Rationale for rating The rating upgraded is primarily driven by the regularization of the LC and as per the banker the account is now satisfactory, decline in business risk profile of the firm marked with deterioration in profitability margin and stretched liquidity profile. However, the rating continues to reflect the experienced promoters and management. |
| About the Company |
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Delhi based, O C Sweaters LLP (formerly known as Orient Craft Sweaters Pvt Ltd) was incorporated in July 2011 and is part of the Orient Craft Group. O C Sweaters LLP is a manufacturer of sweaters in India with capacity of producing 120,000-150,000 units a month and having gauge range from 4gg-12gg. Manufacturing facility is situated at IMT Manesar, Gurgaon spread into 4 acres of land with 165,000 sq ft. of covered area. Plant has 204 Stoll machines and 8 flat-hand machines. Post Covid’19, OC Sweaters LLP also built its capacity into manufacturing of woven garments and has approximately 400 sewing machines with monthly capacity of 200,000 units. Mr. Sudhir Dhingra, Mr. Sahil Dhingra and Ms. Shilpa Dhingra are the managing partners in the company.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of O C Sweaters LLP to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced promoters and management
Mr. Sudhir Dhingra who is the promoter of Orient Craft Group, has over 46 years of experience in the business of textile manufacturing and exports. He is ably assisted by his daughter Ms. Shilpa Dhingra who is heading the design department of OC Sweaters LLP and son Mr Sahil Dhingra who are partners in this firm. The management team has rich experience in the garment industry. Support from Partner Partner of the firm have infused funds in the firm in the form of additional capital during FY 23 to support the liquidity and working capital requirements. Going forward it is expected that the promoters will infuse additional funds to support the business. |
| Weaknesses |
| Weak financial risk profile
The weak financial risk profile of the firm marked by negative net worth, negative gearing levels, and negative debt protection metrics. The firm’s net worth of the firm stood at Rs. (25.61) crore as of March 2024 (Provisional) as against Rs. (12.29)crore as of March 31, 2023. The gearing of the firm stood below unity at (2.79) times as on March 31, 2024 (Provisional) as against (4.61) times as of March 31, 2023. The total outside liabilities/tangible net worth (TOL/TNW) stood at (3.70) times as of March 31, 2024 (provisional) as against (6.40) times as of March 31, 2023. The debt protection metrics of the firm remained strong marked by Interest Coverage Ratio (ICR) at (4.95) times and Debt Service Coverage Ratio (DSCR) of (4.95) times in FY2024 (Provisional). Acuite believes that the firm’s financial risk profile will remain at an average level in medium term backed by steady cash accruals and absence of any major debt-funded capex plan. Working Capital Intensive nature of operations The working capital management of the firm is intensive in nature marked by improving but high Gross Current Asset (GCA) days of 346 days in FY2024 (Provisional) as compared to 221 days in FY23. This is due to the extended credit period provided to the buyer of the products. However, the inventory period stood at 112 days in FY2024 (Provisional). The creditor days stood at 119 days in FY24 Provisional as compared to 186 days in FY23. Acuité believes that the working capital cycle of firm will continue to remain intensive due to the prolonged collection mechanism. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The firm has stretched liquidity marked by negative net cash accruals, low Current Ratio, and high bank limit utilization. Firm generated cash accruals of Rs. (11.37) crore for FY2024 (Prov.) Nil debt obligations (term loan prepaid) last year. Current Ratio stood at 1.12 times as on 31 March 2024 (Prov.) as against 0.95 times in the previous year. Cash and Bank Balances of firm stood at Rs 0.61crore. Further Bank Limit Utilization in 07 months ended August 2024 stood high at 100 percent. Acuite believes that the liquidity position of the firm will remain stretched on account of modest scale of operations.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 61.33 | 88.86 |
| PAT | Rs. Cr. | (13.32) | (6.03) |
| PAT Margin | (%) | (21.72) | (6.79) |
| Total Debt/Tangible Net Worth | Times | (2.79) | (4.61) |
| PBDIT/Interest | Times | (4.95) | (1.16) |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| 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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