Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 143.50 ACUITE B+ | Stable | Assigned -
Bank Loan Ratings 13.50 - ACUITE A4 | Assigned
Total Outstanding Quantum (Rs. Cr) 157.00 - -
 
Rating Rationale

­Acuite has assigned its long-term rating of 'ACUITE B+' (read as ACUITE B plus) and short-term rating of 'ACUITE A4' (read as Acuite A four) on Rs. 157.00 crore bank loan facilities of Tandhan Cotton Mills Private Limited (TCMPL). The outlook is 'Stable'.

Rationale for rating assigned
The rating assigned factors in the extensive experience of the promoters of over two decades across various businesses especially in the textile industry. The rating however remains constrained by the susceptibility of delay in commencement of operations and existence in highly competitive and fragmented industry.

About the Company

­Tandan Cotton Mills Private Limited (TCMPL)was incorporated in 2016 to manufacture Denim Fabrics. The company has purchased a land of 9.49 acers in Sabsit Bagnan, Howrah for setting up its manufacturing facility.
TCMPL is promoted by Mr. Ankit Jalan, Mr. Anuj Jalan and Mr. Kishan Lal Modi who have over two decades of experience in the textile industry.
 
Analytical Approach

­Acuitè has considered the standalone business and financial risk profile of Tandhan Cotton Mills Private Limited (TCMPL)
 

Key Rating Drivers

Strengths

­Experienced promoters and established track record of group companies
Tandhan Cotton Mills was incorporated in 2016 to manufacture and supply denim fabrics for the domestic and the export markets. The experienced promoters have been in the business of trading of ready-made garments, manufacturing of HDPE Tarapaulin, hospitality and trading over the last two decades, which helped them build longstanding relationships with its customers and suppliers.

Acuitè believes the experience of the promoters and their established relationship with its customers will the company improve its business risk profile upon commencement of operations.

Weaknesses

Susceptible to the delayed execution of the construction of its manufacturing facility.
TCMPL has purchased a land of 9.49 acers at Sabsit Bagnan, Howrah in West Bengal for setting up of the manufacturing facility. The total cost of the project is Rs. 185 crore which will be funded through 65 percent of bank loans and 35 percent of promoters contribution. The company has completed ~75 percent of the cost for setting up of the manufacturing facility and is expected to be completed by the scheduled completion date of October 2023.  Any delay in commencement of operations will affect the company’s ability to scale up its operations, thereby leading to deterioration in the debt service ability of the company.
Acuitè believes that the timely completion of project and commencement of operations will remain a key rating sensitivity.

Highly competitive and fragmented industry
TCMPL operates in a highly competitive and fragmented denim fabric industry amongst several organized and unorganized players. The company also faces stiff competition from several international players in the industry. This limits the bargaining power of the company.
However, extensive experience of the promoters helps the company in mitigating the risk to a larger extent.

Rating Sensitivities

Timely completion of commencement of operations
Any stretch in liquidity leading to deterioration in financial risk profile
 
Material covenants
­None
 
Liquidity Position
Adequate

­The company has already received disbursement of bank limits of Rs, 83.15 crore for completion of project and has Rs. 35 crore of undisbursed limits available for draw down along with additional infusion of capital of ~Rs. 14 crores by the promoters. Additionally, the term loans also have a principal moratorium till December 2024.
Acuite believes that the ability of the company to maintain adequate liquidity will remain a key rating sensitivity.
 
Outlook: Stable

Acuité believes the outlook on TCMPL will remain ‘Stable’ over the medium term on the back of extensive experience of the promoters. The outlook may be revised to ‘Positive’ if the company is able to ramp up and stabilise its operations in the near to medium term thereby leading to adequate cash generation. Conversely, the outlook may be revised to ‘Negative’ in case of further delays in project execution leading to any adverse implications on its liquidity and ability to service its debt obligations.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 0.00 0.00
PAT Rs. Cr. 1.04 0.44
PAT Margin (%) 0.00 0.00
Total Debt/Tangible Net Worth Times 0.17 0.12
PBDIT/Interest Times 1172.39 8297.63
Status of non-cooperation with previous CRA (if applicable)
­Crisil vide its press release dated 29th August 2022, had denoted the company to CRISIL B+/ CRISIL A4; Issuer Not Cooperating.
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Entities In Manufacturing Sector:- 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

­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.
 
Rating History :
­Not Applicable
 
Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
UCO Bank Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 2.00 Simple ACUITE A4 | Assigned
Union Bank of India Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 2.50 Simple ACUITE A4 | Assigned
State Bank of India Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 5.00 Simple ACUITE A4 | Assigned
Punjab and Sind Bank Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 3.00 Simple ACUITE A4 | Assigned
Punjab and Sind Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 5.00 Simple ACUITE B+ | Stable | Assigned
Union Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 7.50 Simple ACUITE B+ | Stable | Assigned
State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 8.00 Simple ACUITE B+ | Stable | Assigned
UCO Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 2.50 Simple ACUITE B+ | Stable | Assigned
Not Applicable Not Applicable Proposed Long Term Loan Not Applicable Not Applicable Not Applicable 0.50 Simple ACUITE B+ | Stable | Assigned
Not Applicable Not Applicable Proposed Short Term Bank Facility Not Applicable Not Applicable Not Applicable 0.60 Simple ACUITE A4 | Assigned
Not Applicable Not Applicable Proposed Short Term Bank Facility Not Applicable Not Applicable Not Applicable 0.40 Simple ACUITE A4 | Assigned
Punjab and Sind Bank Not Applicable Term Loan Not available Not available Not available 25.00 Simple ACUITE B+ | Stable | Assigned
UCO Bank Not Applicable Term Loan Not available Not available Not available 23.00 Simple ACUITE B+ | Stable | Assigned
Union Bank of India Not Applicable Term Loan Not available Not available Not available 37.00 Simple ACUITE B+ | Stable | Assigned
State Bank of India Not Applicable Term Loan Not available Not available Not available 35.00 Simple ACUITE B+ | Stable | Assigned

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