Press Release

Best Finance Corporation Limited

June 22, 2022
Ratings
Rating
Facilities/Instruments Amount (Rs. crore) Rating1
Action
CARE BBB+ (CE); Stable
(i) Long Term Bank 50.00
[Triple B Plus (Credit Enhancement); Reaffirmed
Facilities@ (Reduced from 120.00)
Outlook: Stable ]
Provisional CARE A (CE); Stable
(ii) Long Term Bank
70.00 [Provisional Single A (Credit Enhancement); Assigned
Facilities$
Outlook: Stable ]
120.00
Total Bank Facilities (₹ One Hundred Twenty Crore
Only)
@ backed by Letter of Comfort extended by Best Corporation Private Limited (BCPL, rated CARE A; Stable/ CARE A1).
$ Provisional ratings on the proposed bank facilities backed by Corporate Guarantee (CG) proposed to be extended by Best
Corporation Private Limited (BCPL).
Details of instruments/facilities in Annexure-1

Unsupported Rating2 CARE BBB- (Triple B Minus) [Reaffirmed]

Note: Unsupported Rating does not factor in explicit credit enhancement

Rating in the absence of the pending steps/ documents Same as Unsupported Rating

Detailed Rationale & Key Rating Drivers for the credit enhanced debt
The ratings assigned to the bank facilities [(i) above] of Best Finance Corporation Limited (BFCL) factors in the credit
enhancement in the form of Letter of Comfort extended by Best Corporation Private Limited (BCPL rated ‘CARE A; Stable/ CARE
A1’).
The ratings assigned to the bank facilities [(ii) above] of Best Finance Corporation Limited (BFCL) are based on credit
enhancement in the form of unconditional and irrevocable Corporate Guarantee to be extended by Best Corporation Private
Limited.
Further, the above rating is provisional and will be confirmed once the company executes the guarantee documents to the
satisfaction of CARE
Detailed Rationale & Key Rating Drivers of Best Corporation Private Limited (BCPL)
The ratings assigned to the bank facilities of BCPL continue to draw strength from vast experience of the promoters and
established track record of the company in the textile industry, long-standing relationship with established clients and strong
capital structure characterised by low gearing levels and comfortable debt protection metrics. The ratings are, however,
constrained by the moderate client concentration, exposure to group companies and vulnerability of profit margin to volatility in
the raw material prices and foreign currency fluctuations.

Detailed Rationale & Key Rating Drivers of Best Finance Corporation Limited
The unsupported rating of Best Finance Corporation Limited (BFCL) derives strength from the promoter group and
demonstrated support by the promoter group to BFCL, adequate capitalisation levels for the current scale of operations and
good profitability.
The ratings are, however, constrained by relatively small scale of operations with limited geographical presence, concentrated
resource profile, moderate asset quality during FY22, exposure to gold price movement risk and intense competition in the gold
loan business.

Rating Sensitivities of BCPL

Positive Factor – Factors that could lead to positive rating action/upgrade:
• The ability to scale up operations with the total operating income (TOI) exceeding Rs.1,000 crore with a greater
diversification in the customer profile.

1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications
2
As stipulated vide SEBI circular no SEBI/ HO/ MIRSD/ DOS3/ CIR/ P/ 2019/ 70 dated June 13, 2019. As per this circular, the
suffix ‘CE’ (Credit Enhancement) is assigned to the ratings with explicit external credit enhancement, against the earlier used
suffix ‘SO’ (Structured Obligation).

1 CARE Ratings Ltd.

 Press Release

Negative Factor – Factors that could lead to negative rating action/downgrade:

• Sharp drop in the profitability margins to below 15% at profit before interest, lease rentals, depreciation and taxation
(PBILDT) levels.
• Any large debt-funded capital expenditure leading to moderation in the overall gearing above 0.8x.
• Deterioration of performance of the group entities and subsidiaries where the company had extended loans and
advances and any significant increase of exposures to the group entities.

Detailed description of the key rating drivers for BCPL

Key Rating Strengths
Experience of the promoters and established track record of the company
BCPL was incorporated in 2004 by Mr S Ramasamy (Chairman), a first-generation entrepreneur. Mr Ramasamy has a vast
experience of about six decades in various aspects of textile & related business. The Chairman is assisted by his two sons Mr R
Rajkumar (Managing Director) and Mr R Dhanapal (Joint Managing Director) who take care of the administrative functions of
the company.

Comfortable capital structure and debt protection metrics

BCPL’s capital structure remains comfortable at 0.06x as on March 31, 2021 with minimal reliance on term loans and working
capital borrowings. With lower debt levels, the interest coverage ratio has remained strong at 63.38x in FY21 as against 52.52x
in FY20. The debt protection metrics also remained strong with total debt/ gross cash accruals to 0.43x as on March 31, 2021
(PY: 0.15).

Established clientele however concentrated

BCPL has a strong customer base in the domestic as well as the international markets on account of the promoter group’s
longstanding presence in the textile business and established track record of BCPL. The top 5 clients of BCPL collectively
accounted for 54.3% (PY: 51.7%) of its total sales in FY21. Though the company earns a major portion of its revenues from
these customers, long association of around two decades partially mitigates the concentration risk.

Key Rating Weaknesses

Concentrated revenue source
Garments contribute to a major portion of the revenues of BCPL contributing 86.38% (PY: 86.01%) to total revenue. The top
five clients of BCPL collectively accounted for 54.3% (PY: 51.7%) of its total sales in FY21. Most of the exports are made to US
(46.9% of total sales) and Europe (10.1% of total sales) in FY21 thereby making the revenues of BCPL concentrated to these
geographies

Exposure to group entities

BCPL has extended loans and advances of Rs.359.3 crore (PY: Rs.353.87 crore) as on March 31, 2021. BCPL also has
investments of Rs.104.21 crore (PY:59 crore) with subsidiaries and group entities which forms 58% (PY: 59.42%) of Networth
as on March 31, 2021. Also as on March 31, 2021, BCPL had extended letter of Comfort of Rs.120 crore to Best Finance
Corporation Private Limited, corporate guarantee of Rs.140 crore to the working capital facilities of three of its subsidiaries.
Adjusting for the corporate guarantees and fund-based exposures to its subsidiaries, the overall gearing stood at 0.46 (PY:
0.30) as on March 31, 2021.

Vulnerability of profit margins to volatility in cotton prices & foreign exchange movements
The profitability of BCPL largely depends on the prices of cotton and yarn which are governed by various factors such as area
under cultivation, monsoon, export quota fixed by the government, international demand-supply situation, etc. BCPL derives
majority of its income from exports that constituted for nearly 87% of the company’s net sales in FY21 as against 80% in FY20.
Though the company hedges around 60%-70% of the forex receivables, it continues to be exposed to the forex fluctuations.

Liquidity of BCPL: Strong

Liquidity is marked by strong accruals against negligible repayment obligations with cash and liquid investments to the tune of
Rs.278.9 crore as on September 30, 2021. The company generally offers credit period of around 2 month and avails credit from
suppliers for around 40 days. BCPL has sanctioned working capital limits of Rs.205 crore and the average utilization of the same
stood at 15.91% over past 12 months ended Feb 2022. BCPL had not availed any moratorium offered by the banks as a relief
measure for covid-19 pandemic

Analytical approach:

2 CARE Ratings Ltd.

 Press Release

For CE Rating: CE provider’s assessment (BCPL standalone).

Unsupported Rating: Standalone, factoring the support from the promoter group. The company shares common promoters
and common brand name with BCPL. BFCL also receives funding support from the promoters as well as promoter group
companies.

Applicable Criteria
Criteria on assigning ‘outlook ‘and ‘credit watch ‘to Credit Ratings
Financial Ratios-Financial Sector
Rating Methodology -Non Banking Finance Companies (NBFCs)
CARE’s Policy on Default Recognition
Criteria for Rating Credit Enhanced Debt
Factoring Linkages Parent Sub JV Group
Policy on assignment of Provisional Ratings
Financial Ratios- Non-Financial Sector
Liquidity analysis of Non-financial sector entities
Cotton Textile
Manufacturing Companies

Validity of the Provisional Rating:

The provisional rating shall be converted into a final rating after receipt of the above-mentioned transaction documents duly
executed/ completion of the above-mentioned steps within 90 days from the date of issuance of the instrument. An extension
of 90 days may be granted on a case-to-case basis in line with CARE Ratings Ltd.’s Policy on Assignment of Provisional Ratings.

Risks associated with provisional nature of credit rating:

When a rating is assigned pending execution of certain critical documents or steps to be taken, the rating is a ‘Provisional’
rating indicated by prefixing ‘Provisional’ before the rating symbol. On execution of the critical documents to the satisfaction of
CARE Ratings Ltd., the final rating is assigned by CARE Ratings Ltd. In absence of receipt of documents/ completion of steps or
where such documents deviate significantly from that considered by CARE Ratings Ltd., the provisional rating will be reviewed
in line with the Policy on Assignment of Provisional Ratings.

About the Credit Enhancement provider -Best Corporation Private Limited

Best Corporation Private Limited (BCPL) was incorporated in the year 2004 by Mr S Ramasamy. BCPL is specialized in the
manufacture of undergarments and babywear with installed capacity of around 3000 sewing machines. The company also has a
dyeing house capable of processing 8 tonnes/day of knitted fabric. The exports contribute to 75% (PY: 80%) of total income in
FY21. Also, as on Dec 31, 2021, the company has a windmill capacity of 8.5 megawatt (MW) and solar power capacity of 5MW.

Brief Financials (Rs. crore)

FY20(A) FY21(A) H1FY22 (P)
Standalone
Total operating income 678.3 655.0 377.0
PBILDT 125.0 127.4 86.0
PAT 105.7 102.6 59.7
Overall gearing (times) 0.02 0.06 0.01
Interest coverage (times) 52.52 63.38 67.69
A: Audited; P: Provisional

About the Company- Best Finance Corporation Limited

Best Finance Corporation Limited (BFCL) is an NBFC registered with the Reserve Bank of India (RBI) as non-deposit accepting
Loan Company headquartered in Tirupur (Tamil Nadu). Incorporated in November 2009, BFCL is promoted by Mr R Rajkumar
and Mr R Dhanapal, the promoters of Best Corporation Private Ltd (BCPL, rated ‘CARE A; Stable/ CARE A1’). The company is
closely held by the promoters and the family members. BFCL is a part of the Best group based in Tirupur and the flagship
company of the group is BCPL, which is engaged in the manufacture of undergarments and baby wear. As on March 31, 2022,
gold loans constituted around 93% of the total outstanding portfolio and the rest is from business loans and personal loans
(microfinance loans). BFCL operates through 72 branches across nine districts in Tamil Nadu.

Brief Financials (Rs. crore) 31-03-2021 (A) 31-03-2022 (A)

Total operating income 40 48
PAT 9 14
Interest coverage (times) 1.80 2.18
Total Assets 221 179

3 CARE Ratings Ltd.

 Press Release

Brief Financials (Rs. crore) 31-03-2021 (A) 31-03-2022 (A)

Net NPA (%) 3.28 10.01
ROTA (%) 4.60 7.06
A: Audited; P: Provisional

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3

Complexity level of various instruments rated for this company: Annexure 4

Annexure-1: Details of Instruments / Facilities

Size of the
Name of the Date of Coupon Maturity Rating Assigned along
ISIN Issue
Instrument Issuance Rate Date with Rating Outlook
(₹ crore)
Fund-based - LT-Cash Credit - - - 50.00 CARE BBB+ (CE); Stable
Un Supported Rating-Un
- - - 0.00 CARE BBB-
Supported Rating (Long Term)
Provisional CARE A (CE);
Fund-based-Long Term - - - 70.00
Stable

Annexure-2: Rating History of last three years

Current Ratings Rating History
Name of the Date(s) Date(s) Date(s)
Date(s) and
Sr. Instrument/ Amount and and and
Rating(s)
No. Bank Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned in
Facilities (₹ crore) assigned in assigned in assigned in
2019-2020
2022-2023 2021-2022 2020-2021
1)CARE BBB+
(CE); Stable
1)CARE 1)CARE
CARE (12-Mar-20)
Fund-based - BBB+ (CE); BBB+ (CE);
1 LT 50.00 BBB+ (CE); -
LT-Cash Credit Stable Stable
Stable 2)CARE BBB+
(06-Apr-22) (06-Apr-21)
(SO); Stable
(04-Apr-19)
Debentures-
1)CARE BBB- 1)CARE BBB- 1)CARE BBB-;
Non CARE BBB-
2 LT 16.89 ; Stable ; Stable - Stable
Convertible ; Stable
(06-Apr-22) (06-Apr-21) (12-Mar-20)
Debentures
1)CARE BBB-;
Fund-based - 1)Withdrawn
3 LT - - - - Stable
LT-Cash Credit (06-Apr-21)
(12-Mar-20)
1)CARE BBB
1)Withdrawn
4 Fixed Deposit LT - - - - (FD); Stable
(06-Apr-21)
(12-Mar-20)
Un Supported
Rating-Un
1)CARE BBB-
5 Supported LT 0.00 CARE BBB- - - -
(06-Apr-22)
Rating (Long
Term)
Provisional
Fund-based- CARE A
6 LT 70.00
Long Term (CE);
Stable

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not Applicable.

4 CARE Ratings Ltd.

 Press Release

Annexure 4: Complexity level of various instruments rated for this company

Sr. No. Name of Instrument Complexity Level
1 Fund-based - LT-Cash Credit Simple
2 Un Supported Rating-Un Supported Rating (Long Term) Simple

Annexure 5: Bank Lender Details for this Company

To view the lender wise details of bank facilities please click here
Note on complexity levels of the rated instrument: CARE Ratings Ltd. has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for any
clarifications.
Contact us
Media Contact
Name: Mradul Mishra
Contact no.: +91-22-6754 3573
Email ID: mradul.mishra@careedge.in

Analyst Contact 1
Name: P Sudhakar
Contact no. - 044-2850 1003
Email ID: p.sudhakar@careedge.in

Analyst Contact 2
Name: Ravi Shankar R
Contact no. - 044-2850 1016
Email ID: ravi.s@careedge.in

Relationship Contact
Name: V Pradeep Kumar
Contact no. - +91-98407 54521
Email ID: pradeep.kumar@careedge.in

About CARE Ratings Limited:

Established in 1993, CARE Ratings Ltd. is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India (SEBI), it has also been acknowledged as an External Credit Assessment Institution (ECAI) by the
Reserve Bank of India (RBI). With an equitable position in the Indian capital market, CARE Ratings Limited provides a wide
array of credit rating services that help corporates to raise capital and enable investors to make informed decisions backed by
knowledge and assessment provided by the company.
With an established track record of rating companies over almost three decades, we follow a robust and transparent rating
process that leverages our domain and analytical expertise backed by the methodologies congruent with the international best
practices. CARE Ratings Limited has had a pivotal role to play in developing bank debt and capital market instruments including
CPs, corporate bonds and debentures, and structured credit.

Disclaimer
The ratings issued by CARE Ratings Limited are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. These ratings do not convey suitability or
price for the investor. The agency does not constitute an audit on the rated entity. CARE Ratings Limited has based its ratings/outlooks based on information
obtained from reliable and credible sources. CARE Ratings Limited does not, however, guarantee the accuracy, adequacy or completeness of any information and is
not responsible for any errors or omissions and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by
CARE Ratings Limited have paid a credit rating fee, based on the amount and type of bank facilities/instruments. CARE Ratings Limited or its subsidiaries/associates
may also be involved with other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE Ratings
Limited is, inter-alia, based on the capital deployed by the partners/proprietor and the current financial strength of the firm. The rating/outlook may undergo a
change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant
factors. CARE Ratings Limited is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE Ratings Limited’s rating.

Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of
rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

**For detailed Rationale Report and subscription information, please contact us at www.careedge.in

5 CARE Ratings Ltd.