2009 august farida shoes

7/27/2019 2009 August Farida Shoes

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Farida Shoes Private Limited

RATING HISTORYAmount Outstandingin Rs. million

Maturitydate

RatingOutstanding

Previous Ratings

March 2009

Rs. 302.1 millionterm loans

LBB+ - -

Rs. 455 million fundbased limits

A4+ - -

Rs. 205 million non-fund based limits

A4+

Rs. 90 millionstandby limits

A4+ - -

ICRA has assigned an LBB+(pronounced L double B plus) rating

to the Rs. 302.1 million rupee termloan facilities of Farida Shoes PrivateLimited (FSPL). The rating indicatesinadequate credit quality.The sign ofplus (+) appended to the ratingsymbol indicates its relativelystronger position within the ratingcategory concerned. ICRA has alsoassigned an A4+ (pronounced A four)rating to the Rs. 455 million fundbased short-term limits, the Rs. 205million non-fund based limits and theRs. 90 million standby limits of FSPL,indicating risk prone credit qualityrating to the short term debtinstrument. The sign of plus (+)appended to the rating symbolindicates its relatively strongerposition within the rating categoryconcerned.

The ratings assigned are constrainedby the current financial risk profile ofthe company characterised by highgearing levels, weak coverageindicators, low profit margins, weakfree cash flows and high working

capital intensity due to a long cashconversion cycle; and, exposure toforex risk by virtue of being a majorexporter. However, the ratings also

For complete rating scale anddefinitions, please refer to ICRAswebsite www.icra.in or other ICRARating Publications

factor in the long track record ofFSPL in leather footwear export

business; association with strongbrands such as Deichmann,Debenheim, Heinrich and Marks &Spencer through outsourcing; andadequate systems in place to controland optimise its operations.

The Indian leather export industry isestimated at US$3.5 billion, withleather footwear exports accountingfor 42% of the total revenues. India isthe second largest footwearmanufacturer in the world after Chinaand accounts for 14% of globalfootwear production of 14.5 billionpairs. India produces 2 billion pairs ofdifferent categories of footwear andexports 115 million pairs. Its majorexport destinations include EuropeanUnion and the United States of

America, which together account for90% of its total footwear exports. Thedomestic leather and footwear marketis, however, highly fragmented with alarge number of small unorganisedplayers. The unorganised sectoraccounts for over 75% of the

production and 65% of the turnover ofthe industry; and continues to be amajor source of competition fororganised manufacturers. India facessignificant competition from China,which is the largest footwear exporterto all key geographies. Thecompetitiveness of Chinese footwearexporters stems from economies of

scale, favourable currency regimeand high productivity of labour. The

European Commission imposed ananti-dumping duty on importedfootwear from China in October 2006.Nonetheless, China continues topose a threat to Indian footwearexporters.

FSPL procures various componentssuch as shoe uppers, soles, insolesand lining material; assemblesfootwear and exports to key markets.These export markets contribute to95% of its total revenues. Theoverseas business is split into twoseasons: Spring & Summer and

Autumn & Winter. Autumn/Wintershipments are effected duringDecember-April and Spring/Summershipments are during June-October.In addition, FSPL handles ordersduring the festival (Christmas/ NewYear) season in November andDecember. The overseas customerssend samples to FSPL based onexisting market trends, fashions andseasons. The process starts normallyfour to six months before the

commencement of each season. Theorders are finalised along with thepayment terms. The company startsthe procurement of raw materialsupon confirmation of orders from itscustomers. The association withmajor brands such as Deichmann,Marks & Spencer, Debenheim and
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Heinrich results in low revenues riskfor FSPL.

The leather industry is labour-intensive and operating margins (of4.6% for FY2008) tend to be weakdue to high raw material costs,packaging costs, and manufacturingcosts. The net margins at 0.7% arelow for FSPL due to its high interestexpense. Its RoCE and RoNW (of11.6% and 6.9%, respectively, in FY2008) remain at moderate levels,thus reflecting the high capitalintensity and low profitability of theindustry.

FSPL has a high working capitalintensity emanating from its longworking capital cycle. FSPL extends

30 days of open credit to 70% of itscustomers; 45-90 days of open creditto 20% of its customers; and insistson L/C sales for the balance 10% ofits customers. FSPL is extendedopen credit for 60 days by 5% of itscustomers; however, 95% of itsprocurement has to backed by L/Cs.High working capital requirements tosupport growth and stretched cashconversion cycle have resulted inhigh gearing levels (of 3.2 times in

FY2008) and subdued cashflows forFSPL. The utilisation of workingcapital facilities has remained high forFSPL, indicating its tight liquidityposition. Going forward, the sales ofFSPL may drop in FY 2010 owing tothe slowdown in leather footwearexport industry together on theaccount of macroeconomicconditions. Neverthless, ICRAexpects the revenues to grow at aCAGR of 4%-5% in the period fromFY2009 to FY2013. The operatingmargins and coverage indicators areexpected to remain weak in the nearterm.

Despite the availability of variousfiscal incentives, leather footwearexporters continue to be affected by

the ongoing macroeconomicslowdown as volume off-take bycustomers has reduced. The buyersare delaying placing of the orderswith footwear manufacturers toensure the retail off-take beforecommitting the volumes, therebyaffecting the capacity utilisation offootwear manufacturers. In additionto the drop in demand, competitionfrom Chinese manufacturers remainsa key challenge.

Company Profile

Farida Shoes Private Limited (FSPL),the flagship company of the FaridaGroup, was incorporated onSeptember 24, 1976 to manufacturefull shoes. FSPL has manufacturing

facilities with a current productioncapacity of 12,000 pairs/day at

Ambur, Vellore District, Tamil Nadu.Promoted by Mr. Rafeeque Ahmedand his family, M/s Farida HoldingsPrivate Limited is the single largeststakeholder of FSPL. The Faridagroup has over 35 years ofexperience in the leather footwearexport business. The closely heldGroup concerns achieved salesrevenues of around Rs. 6700 millionin FY 2008. The group companies

are closely managed by theChairman, Mr. Rafeeque Ahmed andhis sons.

August 2009

KEY FINANCIALSAmount in Rs. Million Dec-08^ Mar-08 Mar-07 Mar-06

Operating Income 1505.80 2044.22 2013.35 1964.57

OPBDIT 61.10 94.74 81.87 43.74

Profit After Tax (PAT) 28.2 14.04 13.20 13.64

Equity Capital 4.99 4.99 4.99

Net Worth 206.61 199.17 187.15

PAT/Operating Income % 1.87% 0.69% 0.66% 0.69%

Profit before Interest and Tax/avg(Total Debt + Net Worth + DTL)

% 11.62% 10.64% 10.95%

OPBDIT/Interest & Financial

Charges

(times) 1.07 1.37 2.04 1.98

Net Cash Accruals/Total Debt % 6% 8% 7%

Total Debt/Net Worth (times) 3.25 2.78 1.23

Total Debt/OPBDITA (times) 7.10 6.75 5.26

NWC/OI (times) 0.25 0.23 0.14Note: ^ are Financial results for the FY2009 till December 2008.Source: Companys Annual Reports


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For further details please contact:

Analyst Contacts:Mr.K. Ravichandran, (Tel. No. +91-44-24333293-94)[email protected]

Relationship ContactsMr. Jayanta Chatterjee, (Tel. No. +91-9845022459)

[email protected]

Copyright, 2009, 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. The ICRAratings are subject to a process of surveillance which may lead to a revision in ratings. Please visit our website(www.icra.in) or contact any ICRA office for the latest information on ICRA ratings outstanding. All informationcontained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Althoughreasonable 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 orimplied, as to the accuracy, timeliness or completeness of any such information. All information contained hereinmust be construed solely as statements of opinion and ICRA shall not be liable for any losses incurred by users fromany use of this publication or its contents
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You can reach us at any of our off ices:

Registered Office

ICRA Limited

1105, Kailash Building, 11th Floor, 26, Kasturba Gandhi Marg, New Delhi 110001

Tel: +91-11-23357940-50, Fax: +91-11-23357014

Corporate Office

Mr. Vivek MathurMobile: 9871221122

Email:[email protected]

Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon 122002

Ph: +91-124-4545310 (D, 4545300 (B) Fax; +91-124-4545350

Mumbai

Mr. L. Shiva Kumar

Mobile: 9821086490

Email: [email protected]

3rd Floor, Electric Mansion, Appasaheb Marathe Marg,

Prabhadevi, Mumbai - 400 025Ph : +91-22-2433 1046/ 1053/ 1062/ 1074/ 1086/ 1087 Fax :

+91-22-2433 1390

Kolkata

Ms. Anuradha Ray

Mobile: 9831086462


A-10 & 11, 3rd Floor, FMC Fortuna, 234/ 3A, A.J.C. Bose Road,

Kolkata-700020.Tel: +91-33-2287 0450/ 2240 6617/ 8839/ 2280 0008 Fax: +91-33-

22470728

Chennai

Mr. Jayanta Chatterjee

Mobile: 9845022459Email:[email protected]

Mr. M.S. K. AdityaMobile: 9963253777


5th Floor, Karumuttu Centre, 634 Anna Salai, Nandanam,

Chennai-600035.

Tel: +91-44-2433 3293/ 94, 2434 0043/ 9659/ 8080, 2433 0724,

Fax:91-44-24343663

Bangalore

Mr. Jayanta Chatterjee

Mobile: 9845022459


2 nd Floor. ,Vayudhoot Chambers, Trinity Circle, 15-16 M.G.Road,

Bangalore-560001.Tel:91-80-25597401/ 4049 Fax:91-80-25594065

Ahmedabad

Mr. L. Shiva Kumar

Mobile: 9821086490


907 & 908 Sakar -II, Ellisbridge,

Ahmedabad- 380006Tel: +91-79-26584924, 26585494, 26582008,26585049

TeleFax:+91-79- 2648 4924

Pune

Mr. L. Shiva Kumar

Mobile: 9821086490


5A, 5th Floor, Symphony, SNO 210, CTS 3202, Range Hills Road,

Shivajinagar,Pune-411 020Tel : (91 20) 2552 0194 - 5; Fax : (91 20) 2553 9231

Hyderabad

Mr. M.S. K. Aditya

Mobile: 9963253777


301, CONCOURSE, 3 rd Floor, No. 7-1-58, Ameerpet,

Hyderabad 500 016.

Tel: +91-40-2373 5061 7251 Fax: +91-40- 2373 5152
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

2009 august farida shoes

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