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Ritika Private Limited February 27, 2019 Ratings Amount Facilities Rating1 Rating Action (Rs. crore) 48.95 CARE BBB-; Stable Long-term Bank Facilities Reaffirmed (enhanced from 35.00) (Triple B Minus; Outlook: Stable) 48.95 Total Facilities (Rs. Forty eight crore and ninety five lakh only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The ratings assigned to the bank facilities of Ritika Private Limited (RPL) continues to factor in the promoter’s experience with long track record of operations in the industry, established brands of namely ‘Ri’, ‘Label’ and ‘Ritu Kumar’, and satisfactory financial performance with comfortable capital structure. The ratings are however, constrained on account of working capital intensive nature of operations, susceptibility to forex volatility and intense competition in the industry. Going forward, the company’s ability to increase its scale of operations and improve profitability margins while maintaining its healthy capital structure shall be the key rating sensitivities. Further, the private equity investor, Everstone Capital Partners II LLC is likely to explore exit options with over 4.5 years since its investment in the company. The status of the exit of the PE and any unanticipated leverage at the company/ promoter level as a result of the same shall also be a key monitorable.

Detailed description of the key rating drivers Key Rating Strengths Experienced promoters and long track record of operations: RPL is promoted by Ms. Ritu Kumar Mr. Suresh Chander Kumar and Mr. Amrish Prakash Kumar. Ms. Ritu Kumar is a reputed and acclaimed designer with around 48 years of experience in the industry. She has been the recipient of numerous awards such as the ‘Indira Gandhi Priyadarshini Award’ in 2007, “Chevalier des arts et des lettres” by the French government in 2012 and Padma Shri Award in 2013. Mr. Suresh Kumar; husband of Ms. Ritu Kumar handles the overall operations of the company and has over four decades of experience in the apparel manufacturing industry. Mr Amrish Kumar; son of Ms. Ritu Kumar is an MBA from the University of Southern California in Los Angeles and has around 15 years of experience in the industry. The promoters of the company are further supported by experienced professionals. Everstone Capital Partners II LLC: Everstone group was founded in 2006 by Mr. Atul Kapur and Mr Sameer Sain and is a private equity and real estate investment firm with interests in retail, food and beverages, real estate sector etc. The PE fund invested in the company in FY 15 with a corpus of Rs. 67 cr. The same was utilized by the company to increase its scale of operations through opening of new stores across India. The fund is now likely to explore exit options with over 4.5 years since its investment in the company. Thus, the status of the exit and any unanticipated leverage at the company/ promoter level with its impact on the credit profile of the company shall be a key monitorable.

Established brand name: Ritu Kumar has established itself as a renowned brand in the India as well and abroad. The company is known for its distinctive use of colors, quality of fabrics, intricate embroideries and a gloriously rich Indian aesthetic. Ritu Kumar as a brand has been admired and worn all over the world. Its patrons include Indian stars such as Aishwarya Rai, , , Dia Mirza to name a few and international celebrities such as the late Princess Diana, Mischa Barton, Anoushka Shankar.

Satisfactory financial performance with comfortable capital structure: The total operating income of the company has increased by 13.65% to Rs. 202.69 cr in FY18 from Rs. 178.34 cr in FY17. This is majorly on account of increase in sales volume on account of opening of new stores as well as per unit price. Further, the profitability margins of the company also improved in FY18 as reflected by PBILDT margin of 6.75% (PY: 4.12%) and PAT margin of 2.08% as against losses reported in FY17. With increase in scale of operations the profitability of the company has improved due economies of scale leading to better absorption of fixed cost. Further, the company increased the sale price of products sold which has also contributed in achieving better profitability. However during 9MFY19 (prov.), the company has reported a turnover of Rs.162.44 cr with PBILDT margin of 4.07% and losses at net level of 0.09%. Decline in profitability in 9MFY19 is majorly on account of higher discounts given in order to clear the old inventory leading to lower net realizations.

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The overall gearing of RPL though moderated but remained low at 0.28x (PY: 0.18x) as on 31st March 2018. This is majorly on account of increase in term debt availed by the company to open new stores during the year. Further, other debt coverage indicators marked by TDGCA and interest coverage ratio improved to 2.34 years (PY: 2.56 years) and 8.83 times (PY: 3.17 times) respectively during FY18 majorly on account of improved profitability.

Key Rating Weaknesses Working capital intensive nature of operations: The business of RPL is highly working capital intensive in nature and with the presence of both manufacturing and retail business. In FY18, the company’s operating cycle remained elongated primarily on account of high inventory holding period due to the requirement to keep a large amount of inventory in the stores as finished goods.

Foreign currency exposure: The company derives approximately 20-25% of its total revenue from exports to UK, USA, Europe etc based on orders received. RPL hedges around 50% of its exports receivable by availing bill discounting facilities, still around 40% remains un-hedged, exposing it to appreciation in the value of rupee against foreign currency which may impact its cash accruals.

Intense competition: Textile industry is highly competitive and cyclical in nature having few large players and several unorganized regional players. Though Indian apparel industry provides strong opportunity to grow, it is highly competitive marked by presence of some of the large corporate groups. Moreover, growth of the Indian apparel sector is closely linked to the growth of the economy and hence any downturn in economic environment may also slow down the demand for branded apparel in light of discretionary nature of spending on these products. However, entry of international brands, changes in preferences from non-branded to branded, the fast growing economy, large young consuming population in the country has made India a highly lucrative market which improves the growth prospects of companies like RPL which manufactures designer apparel for women.

Liquidity Analysis: The liquidity profile of the company remained satisfactory as reflected by current ratio of 2.10x and cash and cash equivalents of Rs. 8.27 cr as on 31st March 2018 (Rs. 1.75 cr as on 31st December 2018). Also, the working capital utilization remained moderate at 52.40% during the past 12 months ending December 2018.

Analytical approach: Standalone

Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE’s Policy on Default Recognition Rating Methodology-Manufacturing Companies Financial ratios – Non-Financial Sector

About the Company Ritika Private Limited (RPL) incorporated in July, 1976 is engaged in the business of manufacturing and retailing of designer apparel and accessories for women. The company is promoted by Ms. Ritu Kumar; a reputed and acclaimed designer with around 48 years of experience in the industry. The company has three manufacturing facilities in out of which two are in Gurgaon (Haryana) and one is in Kolkata (West Bengal) wherein they manufactures designer wear for women under three brands namely “Ritu Kumar”, “Label Ritu Kumar” and “Ri”.

Brief Financials (Rs. crore) FY17 (A) FY18 (A) Total operating income 178.34 202.69 PBILDT 7.35 13.67 PAT -0.70 4.21 Overall gearing (times) 0.18 0.28 Interest coverage (times) 3.17 8.83 A: Audited Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

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Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

Analyst Contact: Name: Ms. Jasmeen Kaur Tel: 011-45333245 Mobile: 9810401324 Email: [email protected]

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned Instrument Issuance Rate Date Issue along with Rating (Rs. crore) Outlook Fund-based - LT-Term - - October 2022 4.95 CARE BBB-; Stable Loan Fund-based - LT-Cash - - - 44.00 CARE BBB-; Stable Credit

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2018-2019 2017-2018 2016-2017 2015-2016 1. Fund-based - LT-Term LT 4.95 CARE - 1)CARE BBB- - - Loan BBB-; ; Stable Stable (14-Feb-18)

2. Fund-based - LT-Cash LT 44.00 CARE - 1)CARE BBB- - - Credit BBB-; ; Stable Stable (14-Feb-18)

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CONTACT Head Office Mumbai Ms. Meenal Sikchi Mr. Ankur Sachdeva Cell: + 91 98190 09839 Cell: + 91 98196 98985 E-mail: [email protected] E-mail: [email protected]

Ms. Rashmi Narvankar Mr. Saikat Roy Cell: + 91 99675 70636 Cell: + 91 98209 98779 E-mail: [email protected] E-mail: [email protected] CARE Ratings Limited (Formerly known as Credit Analysis & Research Ltd.) Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022 Tel: +91-22-6754 3456 | Fax: +91-22-6754 3457 | E-mail: [email protected]

AHMEDABAD JAIPUR Mr. Deepak Prajapati Mr. Nikhil Soni 32, Titanium, Prahaladnagar Corporate Road, 304, Pashupati Akshat Heights, Plot No. D-91, Satellite, Ahmedabad - 380 015 Madho Singh Road, Near Collectorate Circle, Cell: +91-9099028864 Bani Park, Jaipur - 302 016. Tel: +91-79-4026 5656 Cell: +91 – 95490 33222 E-mail: [email protected] Tel: +91-141-402 0213 / 14 E-mail: [email protected] BENGALURU Mr. V Pradeep Kumar KOLKATA Unit No. 1101-1102, 11th Floor, Prestige Meridian II, Ms. Priti Agarwal No. 30, M.G. Road, Bangalore - 560 001. 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) Cell: +91 98407 54521 10A, Shakespeare Sarani, Kolkata - 700 071. Tel: +91-80-4115 0445, 4165 4529 Cell: +91-98319 67110 Email: [email protected] Tel: +91-33- 4018 1600 E-mail: [email protected] CHANDIGARH Mr. Anand Jha NEW SCF No. 54-55, Ms. Swati Agrawal First Floor, Phase 11, 13th Floor, E-1 Block, Videocon Tower, Sector 65, Mohali - 160062 Jhandewalan Extension, New Delhi - 110 055. Chandigarh Cell: +91-98117 45677 Cell: +91 85111-53511/99251-42264 Tel: +91-11-4533 3200 Tel: +91- 0172-490-4000/01 E-mail: [email protected] Email: [email protected] PUNE CHENNAI Mr.Pratim Banerjee Mr. V Pradeep Kumar 9th Floor, Pride Kumar Senate, Unit No. O-509/C, Spencer Plaza, 5th Floor, Plot No. 970, Bhamburda, Senapati Bapat Road, No. 769, Anna Salai, Chennai - 600 002. Shivaji Nagar, Pune - 411 015. Cell: +91 98407 54521 Cell: +91-98361 07331 Tel: +91-44-2849 7812 / 0811 Tel: +91-20- 4000 9000 Email: [email protected] E-mail: [email protected]

COIMBATORE CIN - L67190MH1993PLC071691 Mr. V Pradeep Kumar T-3, 3rd Floor, Manchester Square Puliakulam Road, Coimbatore - 641 037. Tel: +91-422-4332399 / 4502399 Email: [email protected]

HYDERABAD Mr. Ramesh Bob 401, Ashoka Scintilla, 3-6-502, Himayat Nagar, Hyderabad - 500 029. Cell : + 91 90520 00521 Tel: +91-40-4010 2030 E-mail: [email protected]

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