Care Ratings assigns "BBB/Stable/A3+" rating to Bombay Dyeing

Bombay Dyeing & Manufacturing Company said that Care Ratings has assigned "CARE BBB; Stable" rating to the long-term bank facilities and the fixed deposit programme of the company.

The agency has assigned CARE A3+ rating to the short term bank facilities of Bombay Dyeing.

Care Ratings said that the ratings assigned to the bank facilities of The Bombay Dyeing & Manufacturing Company (BDMCL) draws strength from its long and established track record in the PSF/Textile industry and its lineage to the established Wadia Group.

The ratings also take into account the YoY improvement in scale of operations of the company, albeit it continues to remain loss making at PAT level. CARE has also considered the fact that there is low execution risk for the real estate project as construction is completed.

The Occupancy Certificate (OC) project is largely received and is likely to drive sales momentum for unsold inventory going forward. Further CARE also notes that the company has its own land banks and there is scope for monetizing them which would unlock positive cashflows in the future which would be utilized for deleveraging plans.

The ratings also factor the weak financial risk profile of the company marked by a highly leveraged capital structure with a negative networth over the past two fiscals ending FY22. There has been consistent cash losses since last two fiscals with debt repayment being supported by infusion from promoter group companies and external refinancing.

CARE also takes cognizance of the fact that quantum of financial support being extended by Wadia group has increased. CARE believes that improvement in financial risk profile of BDMCL is likely to happen only after substantial deleveraging which will result from successful implementation of proposed monetization and fund-raising plans. Timely asset monetization/fund raising plans for deleveraging would remain key monitorable.

The above rating strengths are also tempered by challenging market conditions and high-ticket size of flats which exposes BDMCL to marketing/saleability risk for the unsold inventory in the real estate. The real estate market is highly cyclical in nature inherently.

The textile industry is also cyclical in nature and is sensitive to general economic conditions and factors such as consumer demand, inflation, disposable income levels and demographic trends. Margins are exposed to volatility in raw material prices and competition in Textile segment. The profitability margins are also susceptible to fluctuations in key raw material prices and forex fluctuation risks.

Bombay Dyeing and Manufacturing Company is part of Wadia Group. It originated as an integrated textile mill however; it is currently engaged primarily in the business of real estate development, polyester staple fibre (PSF, hold 15% of market share) and textile retail.

The company reported a consolidated net loss of Rs 93.07 crore in the quarter ended September 2022 as against net loss of Rs 93.40 crore during the previous quarter ended September 2021. Sales rose 50.38% to Rs 745.22 crore in Q2 FY23 over Q2 FY22.

The scrip lost 0.32% to currently trade at Rs 78.65 on the BSE.

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