10/30/24, 3:49 PM Rating Rationale

Rating Rationale
April 29, 2021 | Mumbai

Safari Industries India Limited

Ratings Reaffirmed at 'CRISIL A-/Stable/CRISIL A2+'

Rating Action
Total Bank Loan Facilities Rated Rs.150 Crore
Long Term Rating CRISIL A-/Stable (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank facilities of Safari Industries India Ltd
(Safari).

The outbreak of Covid-19 pandemic and the resultant nation-wide lockdown, restrictions on travel, weddings and closure of
education institutions, malls and hypermarkets, starting from the middle of March 2020, significantly impacted company’s
operating performance.

Revenue is estimated to have dropped by 50-60% and profitability was subdued in fiscal 2021. While demand saw a pick up
especially starting Q3FY21 supported by opening up of the economy and price discounts offered, the current resurgence in
Covid-19 infection rate has again led to imposition of strict restrictions, which may prolong the recovery in revenue.

Various cost control measures adopted by the management starting FY21, have partially restricted the negative impact of
the sales shock and price discounts, on the profitability. These cost control measures are expected to continue and should
help the company to be profitable in fiscal 2022, despite the slower recovery expected in revenue.

The overall impact on the operating performance, though significant, is expected to be transitionary and is likely to gradually
recover over medium term.

Additionally, despite the impact of pandemic, the financial risk profile has remained strong with marginal debt and healthy
capital structure. The company has also recently raised Rs 75 crore through issuance of compulsory convertible debentures
(CCD). This coupled with unutilized bank lines has helped the company to build a strong liquidity buffer to tide over the
current situation.

The ratings continue to reflect an established market position in the Indian luggage industry and a strong financial risk
profile. These strengths are partially offset by working capital-intensive operations and exposure to volatility in foreign
exchange (forex) rates and input prices.
Analytical Approach
For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Safari and its fully owned
subsidiary, Safari Lifestyles Ltd (SLL). This is because the two companies, together referred to as Safari, are in the same
line of business with operational synergies, and have a common management.

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
Established brand in the luggage industry: The organised Indian luggage industry is oligopolistic in nature. Safari is
one among the largest luggage brand domestically and claims market share of around 17-18% in the oligopolistic
organised luggage sector. A pan India distribution network, comprising over 3,500 customer touch points, and an
established product portfolio, further strengthen its market position.

Strong financial risk profile: The networth was healthy at Rs 229.1 crore as on March 31, 2020, (Rs 197.5 crore as on
March 31, 2019). The total outside liabilities to adjusted networth ratio was comfortable at 0.8 time as on March 31,
2020, and is likely to improve to less than 0.5 times, over the medium term. The company is expected to be almost debt
free as on March 31 2021 and debt levels are likely to remain marginal over the medium term. The financial risk profile

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10/30/24, 3:49 PM Rating Rationale
is expected to remain strong, backed by healthy cash accrual and absence of any debt-funded capital expenditure
(capex), over the medium term

Weaknesses
Exposure to volatility in raw material prices and forex rates: Profitability is susceptible to prices of imported soft
luggage and raw materials, which account for 45-50% of operating cost. Any sharp fluctuation is likely to impact the
operating margin. Majority of the soft luggage is imported against nil exports. While forex exposure is mitigated through
forward contracts, profitability continues to be susceptible to volatility in forex rates.

Working capital-intensive operations: Gross current assets (GCAs) were high at 171 days, driven by debtors and
inventory of 78 days and 95 days, respectively, as on March 31, 2020. While debtors are expected to be sustained at
80-90 days, inventory is likely to improve to around 90 days over the medium term. The improvement in inventory is
backed by lower import of luggage from China and higher revenue contribution from hard luggage, which is
manufactured in India and has lower inventory levels. Change in the product mix and local procurement is expected to
reduce reliance on China, over the medium term.
Liquidity: Strong
Net cash accruals is expected to be over Rs 20-45 crore per annum over the medium term against nil debt obligations.
Average bank limit utilisation was 42% over the 12 months through December 2020. The current ratio was at 2.05 times as
on March 31, 2020, and is expected to remain healthy, over the medium term. The company recently raised Rs 75 crore
through issuance of CCD, the proceeds remain as liquid asset and strengthens the liquidity profile of the company. The
accrual, along with an unutilised portion of bank limits and liquid assets, would provide ample liquidity to meet incremental
working capital requirement and capex, over the medium term.
Outlook: Stable
CRISIL Ratings believes that the business risk profile is expected to be benefited by a strong distribution network and robust
positioning in the mid- to lower-segment of the market.
Rating Sensitivity Factors
Upward Factors:
Sustained growth in revenue and market share; and improvement in operating margins to above 12% leading to
better cash accruals
Improvement in working capital cycle and low reliance on external debt sustains healthy financial risk profile

Downward Factors:
Slower than expected recovery in revenue over the medium term and operating margins sustained below 6%,
weakening net cash accruals
Stretch in working capital cycle or large debt funded capex/acquisition weakens the financial risk profile
About the Company
Safari was incorporated in 1980 by Mr Mehta and family. The company was taken over by Mr Sudhir Jatia in 2012. It
manufactures and sells luggage under the brand, Safari. The manufacturing unit is in Halol, Gujarat. Safari is listed on both
Bombay Stock Exchange and National Stock Exchange
Key Financial Indicators
Particulars Unit 2020 2019
Revenue Rs.Crore 689 578
Profit After Tax (PAT) Rs.Crore 30.7 27.2
PAT Margin % 4.5 4.7
Adjusted debt/adjusted networth Times 0.3 0.5
Interest coverage Times 7.1 12.0

Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available
on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they
consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

Name of Date of Coupon Maturity Complexity Issue size Rating assigned
ISIN
instrument allotment rate (%) date Levels (Rs.Crore) with outlook
Fund-Based
NA NA NA NA NA 23.8 CRISIL A-/Stable
Facilities
Non-Fund
NA NA NA NA NA 27.5 CRISIL A2+
Based Limit
Working
NA Capital NA NA NA NA 98.7 CRISIL A-/Stable
Facility

Annexure – List of entities consolidated

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10/30/24, 3:49 PM Rating Rationale

Extent of
Names of Entities Consolidated Rationale for Consolidation
Consolidation
Full Parent company, in the same line of business with operational
Safari Industries India Ltd
Consolidation synergies, and have a common management.
Full Wholly owned subsidiary, in the same line of business with
Safari Lifestyles Ltd
Consolidation operational synergies, and have a common management.

Annexure - Rating History for last 3 Years

Current 2021 (History) 2020 2019 2018 Start of 2018
Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount
Fund Based CRISIL CRISIL CRISIL CRISIL
LT 122.5 -- 31-03-20 -- 21-12-18
Facilities A-/Stable A-/Stable A-/Positive A-/Stable
CRISIL CRISIL
-- -- -- -- 14-12-18
A-/Positive BBB/Positive
Non-Fund Based CRISIL CRISIL CRISIL
ST 27.5 -- 31-03-20 -- 21-12-18 CRISIL A2+
Facilities A2+ A2+ A2+
CRISIL
-- -- -- -- 14-12-18 --
A2+
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 CRISIL
Fund-Based Facilities 23.8 Fund-Based Facilities 23.8
A-/Stable A-/Stable
Non-Fund Based Limit 27.5 CRISIL A2+ Non-Fund Based Limit# 27.5 CRISIL A2+
CRISIL Working Capital CRISIL
Working Capital Facility 98.7 98.7
A-/Stable Facility# A-/Stable
Total 150 - Total 150 -
#Fully fungible between fund based and non-fund based facilities

Criteria Details

Links to related criteria

Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation
The Rating Process
Understanding CRISILs Ratings and Rating Scales
CRISILs Bank Loan Ratings

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