Campus Activewear Limited - Ratings reaffirmed at 'CRISIL A+ / Stable / CRISIL A1', rated amount enhanced for Bank Debt

CRISIL Ratings has reaffirmed its rating on the bank facilities of Campus Activewear Ltd (CAL; part of the Campus group) to 'CRISIL A+/Stable/CRISIL A1'.

The rating continues to reflect the company's strong business risk profile. In 9MFY23 company has achieved the revenue of Rs.1126 cr. with sales volume rising to 1.80 crore pairs from 1.36 crore in 9MFY22 and average selling price increasing to Rs 630 per pair from Rs 547 in FY21. The revenue is expected to grow in the range of 25%-30% in fiscal 2023 supported by expected ramp-up of operations following capacity enhancement, healthy demand from 2500+ new designs launched and strong brand recall in the mid-premium segment. Earnings before interest, tax, depreciation and amortisation (Ebitda) declined to ~17.34 in 9MFY23 from 19.43% in 9MFY22, due to the rising raw material prices. The margin is expected to remain comfortable at around 18-20% over the medium term which is supported by the inhouse sole manufacturing unit in Ganaur and sustained price passthrough to end consumers in a regulated manner. Focus on exclusive brand outlets, diversification through online channels and franchisee model should continue to support the business risk profile and healthy return on capital employed (RoCE) over the medium term. Sustenance of working capital cycle, primarily inventory management, remains a key monitorable.

The ratings also factor in the strong financial risk profile of the Campus group, driven by expected networth of over Rs 700 crore in FY23 backed by continuous accretion to reserve. Gearing is expected to remain less than 1 time in FY23, driven by expected healthy cash accrual leading to strong networth. Debt protection metrics remained healthy with expected interest coverage and net cash accrual to adjusted debt ratio of 15 times and 1.2 times, respectively, in fiscal 2023.

In August 2017, TPG Growth III SF Pte. Ltd, the growth equity platform of American investment firm has acquired a significant minority (17.19 percent) stake in Campus. Post the listing in May 2022 the stake was reduced to 7.63%. TPG Growth III SF Pte. Ltd. has further sold its remaining stake of 7.63% through the open market sales Rs. 347.24 per share on March 24, 2023.

The ratings continue to reflect the healthy market position of the Campus group in the footwear industry backed by strong brand, geographically diversified presence and wide product portfolio, along with comfortable financial risk profile. These strengths are partially offset by stretched working capital cycle and exposure to intense competition.

Shares of Campus Activewear Limited was last trading in BSE at Rs. 337.80 as compared to the previous close of Rs. 335.25. The total number of shares traded during the day was 34106 in over 1476 trades.

The stock hit an intraday high of Rs. 339.35 and intraday low of 334.70. The net turnover during the day was Rs. 11473804.00.

Source : Equity Bulls

Keywords

CampusActivewear INE278Y01022 Footwear RatingUpdate