CARE reaffirms rating of Faze Three Ltd

CARE Ratings Ltd has re-affirmed the credit rating with revision in outlook to positive 'CARE A-; Positive/CARE A2+' (pronounced as CARE Single A Minus; Outlook: Positive/A Two Plus) issued by it for Faze Three Limited's Long-term/short-term bank facilities of Rs. 155.00 crores.

The reaffirmation in the rating assigned with revision in outlook to positive of Faze Three Limited (FTL) factors in the improvement in the scale of operations based on almost full utilisation of the erstwhile capacity and the significant improvement in FY22 over FY21 and in Q1FY23 results over Q1FY22 (growth in revenue of 55.82% in FY22 over FY21), the profit before interest, lease rentals, depreciation and taxation (PBILDT) margin of 17.25% in FY22 (FY21: 15.27%) resulting into a better profit-after-tax (PAT) margin for the company. The company's return on capital employed (ROCE) has been over 20% for FY22 and is estimated to continue at the mentioned levels.

CARE Ratings Limited (CARE Ratings) believes that the company will continue to benefit from the demand shifting from China to India for textile products from American and European markets, which has resulted in improved visibility of sales in the coming years. The rating continues to derive strength from the company's experience in manufacturing home furnishing products, the made-to-order business model, the integrated nature of operations, the diversified product mix and customer base, the growth in operations, the improvement in PBILDT margins over the years, the comfortable capital structure, debt protection metrics, and the significant brownfield expansion from internal accruals undertaken and ongoing by the company. The company has undertaken a capex of over ₹50 crore already from internal accruals over the past 18 months to enhance capacity across all factories and product lines in order to cater to future growth from existing customers itself.

The ratings are, however, constrained by relatively long operating cycle, the geographical concentration of revenue (the US and the UK/European markets), the ability to manage and pass on fluctuations in raw material prices and foreign exchange rates, and the continuity of government policies on export benefits.

Source : Equity Bulls

Keywords

FazeThree RatingUpdated Reaffirmed OutlookRevision Positive