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Khadim India Limited — Audit Report / Information 2022
Oct 7, 2021
62359_rns_2021-10-07_ed1c7938-62aa-43e2-ab08-565541f099c4.pdf
Audit Report / Information
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October 07, 2021
The Manager The Manager The Department of Corporate Services The Listing Department BSE Limited National Stock Exchange of India Limited P. J. Towers, Exchange Plaza, Bandra Kurla Complex, Dalal Street, Mumbai - 400 001 Bandra (East), Mumbai - 400 051 Scrip Code - 540775 Symbol - KHADIM
Dear Sir / Madam,
Ref: Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations')
Sub: Re-affirmation and Withdrawal of Credit Rating by ICRA Limited
Pursuant to the provisions of Regulation 30 of the Listing Regulations, we would like to inform that at Company’s request, ICRA Limited has re-affirmed and withdrawn the rating assigned to overall Bank Borrowings of the Company for an aggregate amount of ₹ 204 Crore.
Enclosed herewith, please find the rationale dated October 07, 2021 for re-affirmation and withdrawal of credit rating issued by ICRA Limited.
Kindly take note of the same.
Thanking you,
Yours truly,
For Khadim India Limited
Digitally signed by ABHIJIT ABHIJIT DAN DAN Date: 2021.10.07 16:23:48 +05'30' Company Secretary & Head - Legal Membership No.: A21358
Company Secretary & Head - Legal
Encl: As above
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October 7, 2021
Khadim India Limited: Ratings reaffirmed and withdrawn
Summary of rating action
| Instrument* | Previous Rated Amount (Rs. crore) |
Current Rated Amount (Rs. crore) |
Rating Action |
|---|---|---|---|
| Fund-based – Cash Credit | 112.50 | 112.50 | [ICRA]BBB-(Stable) reaffirmed and withdrawn |
| Fund-based – Term Loans | 26.55 | 26.55 | [ICRA]BBB-(Stable) reaffirmed and withdrawn |
| Non-Fund based – Letter of Credit/ Bank Guarantee/ Derivative |
31.50 | 31.50 | [ICRA]A3 reaffirmed and withdrawn |
| Non-Fund based – Letter of Credit/Bank Guarantee1 |
(6.00) | (6.00) | [ICRA]A3 reaffirmed and withdrawn |
| Fund based – Purchase Bill Discounting/Short Term Loans |
12.50 | 12.50 | [ICRA]A3 reaffirmed and withdrawn |
| Unallocated Limits | 20.95 | 20.95 | [ICRA]BBB-(Stable)/ [ICRA]A3 reaffirmed and withdrawn |
| Total | 204.00 | 204.00 |
*Instrument details are provided in Annexure-1 1Sublimit of Cash Credit
Rationale
The reaffirmation in the ratings of Khadim India Limited (KIL) primarily takes into consideration the long experience of the promoters and its established track record in the footwear industry for around four decades. ICRA also notes the company’s strong market presence, and a pan-India network of 881 retail stores and 628 distributors (as on December 31, 2020) that supply Khadim’s products. The ratings also derive comfort from the diversified product portfolio of the company across multiple price points, catering to a wide customer base and various segments. The performance, however, remained weak in FY2021 with the company reporting significant deterioration in margins, thus adversely impacting the debt coverage indicators with interest coverage at 0.26 times in FY2021. While the performance continued to remain muted in Q1FY2022, the same remained better as compared to significant losses in corresponding period of last year. With the expected improvement in H2FY2022, the overall performance is likely to improve for FY2022, though coverage indicators would continue to remain modest at an absolute level. The rating continues to remain constrained by high working capital intensity of business, primarily due to the accumulation of GST receivables and high inventory level of the company, exerting pressure on its liquidity. The company also remain exposed to the high geographical concentration risk as ~70-72% of its total revenues came from East India in the last two financial years. Highly fragmented industry structure characterized by low value-additive nature of business and intense competition from several players further impacts margin of all players including KIL. Besides, the overall profitability remains vulnerable to fluctuations in raw material prices.
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www.icra .in
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Key rating drivers and their description
Credit strengths
Established position of KIL in domestic market – KIL has been in the business of manufacturing footwear and accessories for around four decades and has an established track record in the footwear industry. The company has a pan-India network of 881 retail stores and 628 distributors (as on December 31, 2020), supplying Khadim’s products. East India accounted for around ~70-72% of total revenue in the last two financial years, which exposes the company to high geographical concentration risk. However, its established presence in the market mitigates such risk to an extent.
Diversified product portfolio across multiple price points – KIL has a large product portfolio with various sub-brands at multiple price points, catering to the needs of a wide customer base. The company also caters to various segments – retail, distribution and institutional. The growth in the retail segment has remained subdued, however, distribution and institutional sales have witnessed a steady increase over the past few years.
Credit challenges
Weak financial performance in FY2021; However, the same is expected to improve in current year primarily in H2FY2022 - The performance remained weak in FY2021 with the company reporting significant deterioration in margins, thus adversely impacting the debt coverage indicators. While the performance remained weak in Q1FY2022, the same remained better as compared to significant losses in corresponding period of last year.
High working capital intensity of business – The working capital intensity of operations stood high at 23% in FY2021 primarily due to an accumulation of the GST receivables and high inventory level of the company. This led to high working capital requirements for the company, exerting pressure on its liquidity position.
Fragmented and intensely competitive nature of the industry – The company faces intense competition from multiple branded footwear manufacturers as well as unorganized players, which limit its pricing flexibility and consequently, its ability to expand its operating margins.
Profitability remains susceptible to volatility in raw material prices – As footwear manufacturing is raw material intensive operation, the profit margins remain susceptible to adverse fluctuations in the costs of raw materials. The company’s ability to pass on the increased cost to the customers will remain a key determinant of the company’s profitability, going forward.
Liquidity position: Stretched
ICRA expects the liquidity position of the company to remain stretched on account of lower cash flows from operations. The working capital utilisation remained high at around 80 % of the available limits. The company has a cushion of Rs 26 crore approximately in fund-based limits. Also, the expected improvement in H2FY2022 is likely to be sufficient to meet the debt servicing requirements of the company.
Rating sensitivities
Not applicable as the ratings are being withdrawn.
Analytical approach
| Analytical Approach | Comments |
|---|---|
| Applicable Rating Methodologies | Corporate Credit Rating Methodology Footwear Industry |
www.icra .in
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Parent/Group Support Not Applicable Consolidation/Standalone The ratings are based on the standalone financial statements of the company
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About the company
Khadim’s was founded in 1965, when Late S.P. Roy Burman acquired a single shoe store in Chitpur, Kolkata. Subsequently in 1981, the company was incorporated in the name of S. N. Footwear Industries Pvt. Ltd. Since then, it has grown from a singleshop entity to a company, having 881 retail outlets and 628 distributors for the sale of footwear and accessories. In June 2005, the company’s status was changed from a private limited company to a public limited company under the name, Khadim Chain Stores Limited. Further, in August 2005, the company’s name was changed to Khadim India Limited (KIL). In November 2017, private equity investor, Reliance Alternative Investments Fund, sold its stake through an IPO and the company got listed on the stock exchanges.
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Key financial indicators
| FY2019 (audited) |
FY2020 (audited) |
FY2021 (audited) |
|
|---|---|---|---|
| Operating Income (Rs. crore) | 799.18 | 771.87 | 626.18 |
| PAT (Rs. crore) | 21.17 | -31.22 | -32.91 |
| OPBDIT/OI (%) | 7.40% | 4.52% | 1.13% |
| PAT/OI (%) | 2.65% | -4.04% | -5.26% |
| Total Outside Liabilities/Tangible Net Worth (times) | 0.91 | 1.95 | 2.04 |
| Total Debt/OPBDITA (times) | 1.85 | 3.35 | 15.05 |
| Interest Coverage (times) | 4.28 | 1.07 | 0.26 |
Source: Khadim India Limited, ICRA research PAT: Profit after Tax; OPBDITA: Operating Profit before Depreciation, Interest, Taxes and Amortisation
Status of non-cooperation with previous CRA: Not Applicable
Any other information: None
www.icra .in
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Rating history for past three years
| Instrument | Current Rating (FY2022) | Current Rating (FY2022) | Current Rating (FY2022) | Chronology of Rating History for thepast 3years | Chronology of Rating History for thepast 3years | Chronology of Rating History for thepast 3years | Chronology of Rating History for thepast 3years | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Type | Amount Rated (Rs. crore) |
Amount Outstandin g (Rs. crore) Mar 31, 2020 |
Date & Rating in |
Date & Rating in |
Date & Rating in FY2021 |
Date & Rating in FY2020 |
Date & Rating in FY2019 | ||||
| October 07, 2021 |
Apr 7, 2021 | Jul 23, 2020 |
Feb 21, 2020 |
Jan 28, 2019 |
Aug 6, 2018 | ||||||
| 1 | Cash Credit | Long- term |
112.50 | - | [ICRA]BBB- (Stable) withdrawn |
[ICRA]BBB- (Stable) |
[ICRA]BBB (Negative) |
[ICRA]BBB + (Negative) |
[ICRA]A (Stable) |
[ICRA]A (Stable) | |
| 2 | Term Loans | Long- term |
26.55 | 0.00 | [ICRA]BBB- (Stable) withdrawn |
[ICRA]BBB- (Stable) |
- | - | - | [ICRA]A- (Stable) withdrawn |
|
| 3 | Letter of Credit/ Bank Guarantee/ Derivative |
Short- term |
31.50 | - | [ICRA]A3 withdrawn |
[ICRA]A3 | [ICRA]A3+ | [ICRA]A2 | - | - | |
| 4 | Letter of Credit/ Bank Guarantee1 |
Short- term |
(6.00) | - | [ICRA]A3 withdrawn |
[ICRA]A3 | [ICRA]A3+ | [ICRA]A2 | - | - | |
| 5 | Purchase Bill Discounting/ Short Term Loans |
Short- term |
12.50 | - | [ICRA]A3 withdrawn |
[ICRA]A3 | [ICRA]A3+ | [ICRA]A2 | [ICRA]A1 | [ICRA]A1 | |
| 6 | Unallocated Limits |
Long- term/ Short- term |
20.95 | - | [ICRA]BBB- (Stable)/ [ICRA]A3 withdrawn |
[ICRA]BBB- (Stable)/ [ICRA]A3 |
- | - | - | - | |
| 7 | Letter of Credit/ Bank Guarantee |
Long- term |
- | - | - | - | - | - | [ICRA]A (Stable) |
[ICRA]A (Stable) |
1Sublimit of Cash Credit
Complexity level of the rated instrument
ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website click here
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Annexure-1: Instrument details
| ISIN No | Instrument Name | Date of Issuance / Sanction |
Coupon Rate | Maturity Date | Amount Rated (Rs Crore) |
Current Rating and Outlook |
|---|---|---|---|---|---|---|
| NA | Cash Credit/ SBLC – 1 | - | - | - | 64.50 | [ICRA]BBB- (Stable) withdrawn |
| NA | Cash Credit/ WCDL – 2 | - | - | - | 7.00 | [ICRA]BBB- (Stable) withdrawn |
| NA | Cash Credit/ WCDL – 3 | - | - | - | 6.00 | [ICRA]BBB- (Stable) withdrawn |
| NA | Cash Credit – 4 | - | - | - | 35.00 | [ICRA]BBB- (Stable) withdrawn |
| NA | Covid-19 Emergency Credit Line |
FY2021 | - | FY2022 | 6.45 | [ICRA]BBB- (Stable) withdrawn |
| NA | Guaranteed Emergency Credit Line – 1 |
FY2021 | - | FY2026 | 6.86 | [ICRA]BBB- (Stable) withdrawn |
| NA | Guaranteed Emergency Credit Line – 2 |
FY2021 | - | FY2026 | 3.09 | [ICRA]BBB- (Stable) withdrawn |
| NA | Working Capital Term Loan |
FY2021 | - | FY2026 | 0.55 | [ICRA]BBB- (Stable) withdrawn |
| NA | Guaranteed Emergency Credit Line – 3 |
FY2021 | - | FY2026 | 9.60 | [ICRA]BBB- (Stable) withdrawn |
| NA | Letter of Credit/ Bank Guarantee/ Derivative1 |
- | - | - | 27.50 | [ICRA]A3 withdrawn |
| NA | Bank Guarantee | - | - | - | 2.00 | [ICRA]A3 withdrawn |
| NA | Letter of Credit | - | - | - | 2.00 | [ICRA]A3 withdrawn |
| NA | Bank Guarantee2 | - | - | - | (6.00) | [ICRA]A3 withdrawn |
| NA | Short term loan | - | - | - | 12.50 | [ICRA]A3 withdrawn |
| NA | Unallocated Limits | - | - | - | 20.95 | [ICRA]BBB- (Stable)/ [ICRA]A3 withdrawn |
Source: Khadim India Limited
1one-way interchangeability limit from letter of credit to bank guarantee up to Rs. 3 crore
2Sublimit of Cash Credit
Annexure-2: List of entities considered for consolidated analysis: Not applicable
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ANALYST CONTACTS
Mr. Jayanta Roy
+91 33 7150 1100 [email protected]
Mr. Sumit Jhunjhunwala +91 33 7150 1111 [email protected]
Mr. Priyesh Ruparelia +91 33 7150 1100 [email protected]
Mr. Tanmay Chhaparia
+91 33 7150 1100 [email protected]
RELATIONSHIP CONTACT
Mr. Jayanta Chatterjee
+91 80 4332 6401 [email protected]
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860 [email protected]
Helpline for business queries
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.
For more information, visit www.icra.in
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ICRA Limited
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Registered Office
B-710, Statesman House, 148, Barakhamba Road, New Delhi-110001 Tel: +91 11 23357940-45
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Branches
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© Copyright, 2021 ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.
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