10/30/24, 3:48 PM Rating Rationale

Rating Rationale
September 07, 2022 | Mumbai

Safari Industries India Limited

Ratings upgraded to 'CRISIL A/Stable/CRISIL A1'

Rating Action
Total Bank Loan Facilities Rated Rs.150 Crore
Long Term Rating CRISIL A/Stable (Upgraded from 'CRISIL A-/Positive')
Short Term Rating CRISIL A1 (Upgraded from 'CRISIL A2+')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any
ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has upgraded its ratings on the bank facilities of Safari Industries India Limited (SIIL; part of the Safari group) to
'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Positive/CRISIL A2+'.

The upgrade reflects improvement in the group’s business risk profile while maintaining its strong financial risk profile.
Group has reported revenue of around Rs 706 Crore in fiscal 2022. Growth rate is expected to sustain over the medium
term especially in fiscal 2023 backed by enhanced capacity in the hard luggage segment, expansion plans in tier 2 and tier
3 cities pan India, wide range of products, and expected recovery in travel and tourism. Further there has been sustained
shift in consumer preference towards branded product.

Operating margin improved to 8% in fiscal 2022 (as against operating losses incurred during FY21). Operating margin is
expected to improve further in fiscal 2023 as seen from the Q1 fiscal 2023. Improved capacity utilisation levels with
improved volumes, expected price hikes, lower discounts offered and higher contribution from hard luggage and shift to
larger contribution from polypropylene based products has contributed to improved operating margin.

Gearing is likely to remain under 0.15 time, driven by strong accretion of profit to networth and moderate capital expenditure
(capex). Further, the interest coverage ratio is also projected to be healthy over the medium term.

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 raw material
prices and foreign exchange (forex) rates.
Analytical Approach
For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Safari and its fully owned
subsidiaries, Safari Lifestyles Ltd (SLL) and Safari Manufacturing Limited (SML). This is because these companies, together
referred to as Safari, are in the same line of business with operational synergies and have a common management.

Out of compulsory convertible debentures (CCD) of Rs 75 crore, Rs 68 crore is treated as equity and rest as debt.

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
among the largest luggage brand domestically and claims market share of around 20-22% in the 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. The group continues to launch 3-4 stores per month, aiming to cater to
high cost as well as mass scale segments.

The company focuses largely on the economic segment and benefited from a weakened unorganized sector due to GST
implementation and pandemic related disruptions. Shift in customer preference to branded hard luggage from soft
luggage has also benefitted Safari in capturing further market share in the industry. The group with SML’s manufacturing
capacity will be enhancing its hard luggage manufacturing to 525,000 units a month, driving revenue growth over the
medium term. Reliance on Chinese imports has also reduced over the past few fiscals, due to higher contribution from
hard luggage segment (manufactured locally) and alternative sources developed domestically, partially mitigating any
supply disruption risk. Contribution from hard luggage segment is expected to increase.

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10/30/24, 3:48 PM Rating Rationale
Strong financial risk profile: The networth was healthy at Rs 300.51 crore as on March 31, 2022, (Rs 278.56 crore as
on March 31, 2021). The total outside liabilities to adjusted networth ratio improved to 0.53 times as on March 31st,
2022, from supported by compulsory convertible debenture of Rs 75 crore raised in fiscal 2021 (Rs 68 crore treated as
equity). Although the group is going through a capex expenditure of Rs 70 Crore which is funded by debt of Rs 30 Crore
and remaining by internal accruals, capital structure is expected to be sustained with debt levels likely to remain
moderate. The group is surplus cash funds with a cash balance of Rs 59.43 Crores as of March 31, 2022. The financial
risk profile is expected to remain strong, backed by healthy accrual and moderate 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 50-55% of operating cost. Any sharp fluctuation is likely to impact the
operating margin. Around 45-50% 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 moderate at 172 days, driven by debtors
and inventory of 59 days and 82 days, respectively, as on March 31, 2022. While debtors are expected to moderate to
60-90 days, inventory is likely to remain 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. Overall working capital levels are expected to improve to around 170-180 days over
the medium term
Liquidity: Strong
Net cash accruals are expected to be over Rs 75 crore per annum over the medium term against nominal debt repayment
obligations. Average bank limit utilization was 26% over the 11 months through May 2022. The current ratio was 2.45 times
as on March 31, 2022, and is expected to remain healthy, over the medium term. The company had over Rs 59 crore of
liquid assets as on March 30, 2022. The accrual, along with an unutilized 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 of Safari group 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, maintenance of market share; and sustained operating margins 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:
Subdued revenue growth and operating margins sustained below 7%, constrains overall business risk profile
Stretch in working capital cycle or large debt funded capex/acquisition weakens the financial risk profile
About the Group
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 (Consolidated)
Particulars Unit 2022 2021
Reported revenue Rs crore 703.80 326.75
Reported profit after tax (PAT) Rs crore 22.2 -20.9
PAT margin % 3.15 -6.37
Adjusted debt/adjusted networth Times 0.04 0.03
Interest coverage Times 12.83 -0.46

Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL Ratings` 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.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on
available information. The complexity level for instruments may be updated, where required, in the rating rationale
published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the
Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

Date of Coupon Maturity Issue size Complexity Rating assigned
ISIN Name of instrument
allotment rate (%) date (Rs crore) Levels with outlook

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NA Fund-Based Facilities NA NA NA 23.8 NA CRISIL A/Stable
NA Non-Fund Based Limit^ NA NA NA 27.5 NA CRISIL A1
NA Fund-Based Facilities* NA NA NA 98.7 NA CRISIL A/Stable
*Fully fungible between fund based and non-fund based facilities
^Fully fungible between fund based and non-fund based facilities

Annexure – List of entities consolidated

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

Annexure - Rating History for last 3 Years

Start of
Current 2022 (History) 2021 2020 2019
2019
Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount
Fund Based CRISIL CRISIL CRISIL CRISIL CRISIL
LT 122.5 21-01-22 03-06-21 31-03-20 --
Facilities A/Stable A-/Positive A-/Stable A-/Stable A-/Positive
CRISIL CRISIL
-- -- 29-04-21 -- --
A-/Stable A-/Positive
Non-Fund Based ST 27.5 CRISIL 21-01-22 CRISIL 03-06-21 CRISIL 31-03-20 CRISIL -- CRISIL
Facilities A1 A2+ A2+ A2+ A2+

-- -- 29-04-21 CRISIL -- -- --
A2+
All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities* 23.8 Axis Bank Limited CRISIL A/Stable
Fund-Based Facilities* 40.1 Citibank N. A. CRISIL A/Stable
Fund-Based Facilities* 33.6 HDFC Bank Limited CRISIL A/Stable
Fund-Based Facilities* 25 IndusInd Bank Limited CRISIL A/Stable
Non-Fund Based Limit^ 27.5 Axis Bank Limited CRISIL A1
This Annexure has been updated on 31-Mar-2023 in line with ender-wise facility details as on 31-Mar-2023 received from the rated entity.
*Fully fungible between fund based and non-fund based facilities
^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
Understanding CRISILs Ratings and Rating Scales

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