Rating Advisory

October 08, 2021 | Mumbai Adarsh BirmechaO riginal Template12 3

Knit Gallery India Private Limited

Advisory as on October 08, 2021

This rating advisory is provided in relation to the rating of Knit Gallery India Private Limited

The key rating sensitivity factors for the rating include:

Upward factor

 Sustained improvement in scale of operation by 20% and sustenance of operating margin,

leading to higher cash accrual.
 No Major debt funded capital expenditure plan.

Downward factor
 Decline in operating profitability to below 3% level leading to fall in accruals.
 Stretch in working capital cycle.

CRISIL Ratings has a policy of keeping its accepted ratings under constant and ongoing
monitoring and review. Accordingly, it seeks regular updates from companies on business and
financial performance. CRISIL Ratings is yet to receive adequate information from Knit Gallery
India Private Limited (KGIPL) to enable it to undertake a rating review. CRISIL Ratings is taking
all possible efforts to get the rated entity to cooperate with its rating process for enabling it to carry
out the rating review.

CRISIL Ratings views information availability risk as a key factor in its assessment of credit risk.
(Please refer to CRISIL Ratings’ criteria available at the following link,
https://www.crisil.com/content/dam/crisil/criteria_methodology/basics-of-ratings/assessing-
information-adequacy-risk.pdf)

If KGIPL continues to delay the provisioning of information required by CRISIL Ratings to

undertake a rating review then, in accordance with circulars
SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dt Nov 1, 2016, SEBI/HO/MIRSD/ MIRSD4/ CIR/ P/
2017/ 71 dt June 30, 2017 and SEBI/HO/MIRSD/CRADT/CIR/P/2020/2 dt January 3, 2020
issued by Securities and Exchange Board of India, CRISIL Ratings will carry out the review based
on best available information and issue a press release.

About the group

KGIPL was incorporated in 2018, and it is engaged in manufacturing and exporting of
readymade garments.

KE was established as a partnership firm in Tirupur (Tamil Nadu) between Mr A Vijayanand and Mr A
Vijayprabhu in 2002. It manufactures and exports hosiery garments
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 Rating Rationale
July 31, 2020 | Mumbai

Knit Gallery India Private Limited

'CRISIL BB+/Stable' assigned to bank debt

Rating Action
Total Bank Loan Facilities Rated Rs.5 Crore
Long Term Rating CRISIL BB+/Stable (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has assigned its 'CRISIL BB+/Stable' rating to the long term bank loan facility of Knit Gallery India Private
limited (KGIPL)-Part of Knit Gallery Group.

The rating reflect the partners' extensive experience in the readymade garment industry and their established
relationships with clients, and KG's comfortable financial risk profile. These strengths are partially offset by customer
concentration risk in revenue, and exposure to intense competitive pressure.

Analytical Approach
For arriving at the ratings, CRISIL has revised its analytical approach and combined the business and financial risk
profiles of Knit Gallery (KE) and KGIPL. This is because all these entities, together referred as the KG, operate in the
same industry and have operational and financial linkages.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of
consolidation.

Key Rating Drivers & Detailed Description

Strengths:
* Promoter's extensive experience and established relationships with clients: Benefits from the partners'
experience of about two decades, and strong relationships with customers should continue to support business risk
profile. Its customers are large multinational apparel retailers with established presence and significant market shares
in their respective segments based out of Europe and USA.

* Comfortable financial risk profile: Financial risk profile is comfortable, backed by moderate capital structure and
debt protection metrics. Estimated Networth and total outside liability to tangible networth ratio were around Rs 50
crore and 2 times, respectively, as on March 31, 2020. Estimated Interest coverage remained comfortable at 5 times
in fiscal 2020.

Weaknesses:
* Customer concentration risk in revenue: About 65% of the revenue is derived from a single customer, leading to
high customer concentration. Furthermore, the bulk of revenue comes from Europe, exposing the firm to any demand
fluctuations in the geography. The group's operations were impacted partially due to COVID ' 19 lock down during the
first quarter

* Presence in a highly fragmented industry: Intense competition, mainly from unorganised players in India and
from entities in Bangladesh and Southeast Asia, continues to constrain business risk profile. The firm operates in the
highly fragmented and price-sensitive ready-made garment industry and loss of any one of its major customers could
affect its revenue.

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Liquidity Adequate
Fud based bank limits at group level stood at Rs 56 crores, which is moderately utilized at an average of 80% during
the past twelve months ended April, 2020. Cash accrual are expected to be around Rs 6 crore which is sufficient
against term debt obligation of Rs 1-2 crore over the medium term. Current ratio is estimated to be moderate at 1.3
times as on March 31, 2020. Presence of healthy cash and bank balance further aids the liquidity. The group has
availed moratorium due to COVID ' 19 lock down with its banker.

Outlook: Stable
CRISIL believes KG group will continue to benefit from its partners' extensive experience and established
relationships with customers.

Rating Sensitivity factors

Upward factor
* Sustained improvement in scale of operation by 20% and sustenance of operating margin, leading to higher cash
accrual
* No Major debt funded capital expenditure plan.

Downward factor
* Decline in operating profitability to below 3% level leading to fall in accruals.
* Stretch in working capital cycle.
About the Group
KGIPL was incorporated in 2018, and it is engaged in manufacturing and exporting of readymade garments.

KE was established as a partnership firm in Tirupur (Tamil Nadu) between Mr A Vijayanand and Mr A Vijayprabhu in
2002. It manufactures and exports hosiery garments.

Key Financial Indicators

As on / for the period ended March 31 2019 2018
Operating income Rs crore 231.16 164.01
Reported profit after tax Rs crore 4.11 2.84
PAT margins % 1.78 1.73
Adjusted Debt/Adjusted Net worth Times 1.65 1.97
Interest coverage Times 28.66 3.30

Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL complexity levels are assigned to various types of financial instruments and are
included (where applicable) in the Annexure -- Details of Instrument in this Rating
Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.

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3
Annexure - Details of Instrument(s)
Date of Coupon Maturity Issue Size Complexity Rating Assigned
ISIN Name of Instrument
Allotment Rate (%) Date (Rs Cr) level with Outlook
CRISIL
NA Packing Credit NA NA NA 5 NA
BB+/Stable

Annexure - List of entities consolidated

Name of the company Extent of consolidation Rationale for Consolidation
Knit Gallery Full Same promoter and similar line of business
Knit Gallery India Private Limited Full Same promoter and similar line of business

Annexure - Rating History for last 3 Years

Start of
Current 2020 (History) 2019 2018 2017
2017

Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount

CRISIL
Fund-based Bank LT/S
5.00 BB+/Stabl -- -- -- -- --
Facilities T
e
All amounts are in Rs.Cr.

Annexure - Details of various bank facilities

Current facilities Previous facilities
Amount Amount
Facility Rating Facility Rating
(Rs.Crore) (Rs.Crore)
CRISIL
Packing Credit 5 -- 0 --
BB+/Stable
Total 5 -- Total 0 --

Links to related criteria

CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Recognising Default
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
Criteria for rating entities belonging to homogenous groups

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About CRISIL Ratings

CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in
India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical
rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank
loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual
bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt
instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several
innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions.
We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the
accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

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CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account
and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term
“Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not
constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any
services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this
Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into
consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment
advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or
otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision
within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any
securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as
of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its
opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors
and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional
advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the
accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the
cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event
shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses,
legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of
the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities

5
or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other
applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available
for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and
undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business
units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have
information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public
information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing
conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument
of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL