Press Release

Spykar Lifestyles Private Limited

March 01, 2021
Ratings
Amount
Facilities Rating1 Rating Action
(Rs. crore)
CARE BBB-; Stable Revised from CARE BBB;
100.00
Long term Bank Facilities (Triple B Minus; Stable
(enhanced from Rs.95 crore)
Outlook: Stable) (Triple B; Outlook: Stable)
100.00
Total Facilities
(Rs. One hundred crore only)
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Spykar Lifestyle Private Limited (SLPL) continue to derive strength from the
experience of the management in the lifestyle apparel industry along with the strong brand name of ‘Spykar’ in domestic
market, parentage of Metdist group and continuous financial support provided by them after becoming the majority
shareholder, SLPL’s wide spread distribution network and asset light business model. However, the above rating strengths
continue to be tempered by the decline in income & losses made in FY20 (refers to the period April 1 to March 31), losses at
PBILDT level during 9MFY21 (refers to the period April 1 to December 31) due to the impact of ongoing Covid-19 pandemic,
highly competitive nature of the industry along with increase in competition in branded apparel segment and average financial
risk profile of the company marked by increasing debt and long working capital cycle.
Rating Sensitivities
Positive factors
 Reduction in overall gearing (including acceptances) below 2.0x on sustained basis
 Improvement in PBILDT margins to 10.00% on sustained basis
 Revenues of more than Rs 400 Crores in a sustained basis
Negative Factors
 Deterioration in overall gearing (including acceptances) beyond 4.00x from FY22
 PBILDT margin of less than 7.5% on a sustained basis.
Detailed description of the key rating drivers
Key Rating Strengths
Strong promoter group and exhibited financial support provided by the promoter
Metdist group holds 100% stake in Spykar Lifestyles Private Limited (SLPL). The group has supported the operations of the
company by providing need based financial support to Spykar. Metdist Industries Holdings Limited, Metmin Investment
Holdings Limited & Metmin Investment & trading Private Limited are the shareholders of SLPL. The Metdist Group is promoted
by the Bagri family based in Malaysia. Founded by Lord Bagri, the group is now managed by Mr. Apurv Bagri, President & CEO
Group. The Group is primarily into manufacturing of electrical conductivity grade copper wires which are used in rods, insulated
and non-insulated copper strips which is used in refrigeration and air-conditioning industry in Malaysia and worldwide; the
group also has a presence in fabrication, apparel, real estate and insurance.
Management’s experience in the retail lifestyle industry
Mr. Sanjay Vakharia has been associated with Spykar since its inception. He is responsible for the overall Marketing & Brand
Communication strategies of the company. Mr. Vakharia has followed a distribution strategy of retailing through Multi Brand
Outlet across India, and through Large Format Stores like Shoppers' Stop, Lifestyle, Pantaloons etc.
Established brand name ‘Spykar’ in denims and vast reach in Indian market;
The brand ‘Spykar’ is targeted towards the youth in the premium and medium segment mainly within the men’s casual wear
category. The company posts 40-50% of sales from denims. Spykar has an in-house design and product development team
which makes samples and provides the same to vendors for manufacturing. As on December 31, 2020 the company has 1405
outlets/point of sale vis-a-vis 1635 outlets/ point of sale (POS) across India as on December 31, 2019 & 1405 outlets/ point of
sale (POS) across India as on March 31, 2020 and almost 70% are Exclusive/ Multi brand outlets (EBOs/MBOs).
Asset light business model providing flexibility
The company achieves 95-97% of its revenue through EBO, MBO and LFS format stores where EBO’s are franchisee based and
MBO and LFS are owned by the large retailer’s viz. Shopper Stop, Central. This provides flexibility to Spykar for not investing in
fixed assets. As the capital expenditure requirement to scale up the operations is minimal, this enables the company to
maintain growth while managing working capital requirements. Besides, the security deposits collected from the franchisee,
also act as funding source for 10-15% of store inventory. During Q4FY20, due to the pandemic resulting in closure of stores,
particularly loss making or low profitability stores.

1
Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
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 Press Release

Arrangement with suppliers

Spykar outsources the manufacturing of the garments to known players such as Raymond UCO Denim Pvt Ltd Integra Apparels
and Textiles Ltd (Ashok Piramal group), etc. who also manufacture for larger apparel players. Spykar is involved in the fabric
selection at negotiated rates through the appointed vendors and this also enables the company to have a control over the
quality of fabric. The company manages to avail credit of 30-90 days from suppliers which adds to the working capital flexibility
of Spykar.
Key Rating Weakness
Working capital intensive nature of operations and leveraged capital structure
The company’s overall gearing has worsened slightly to 2.93x as on March 31st 2020 vis-a-vis 2.63x as on March 31st 2019, on
account of increased working capital utilization. Due to long collection period resulting into long operating cycle, which was on
account of delay of receivables during March 2020, due to the ongoing pandemic, the company had to rely heavily on external
borrowings to fund working capital needs. Working capital cycle is at high level around 206 days in FY20 as against 179 days in
FY19. Owing to the retail focus and franchise-based model, around 40% of its revenues is generated by its exclusive stores and
the remaining from large format retail stores and multi brand outlets. The company has to provide 6 months credit period to
the large retailers resulting into higher collection period. The average fund-based working capital utilization was high at 72.60%
providing limited back-up. For 12 months ended December 2020.
Decline in FY20 along with losses at PAT level
SLPL registered a decline of 3.29% in TOI from Rs.390.24 crore in FY19 to Rs.377.42 crore in FY20, which was down to revenue
lost in March 2020 (around 20 days) of around Rs.30 crore. This also resulted in reduction PBILDT levels of around 21.11% &
loss at PAT level vis-à-vis Rs.9.86 crore PAT during FY19. Similarly, PBILDT margins also reduced to 7.64% during FY20 vis-à-vis
9.37% during FY19. From an overall business point of view, there was an improvement in sales (units) for jeans & jackets, which
were offset by a reduction in sales for trousers, shirts & t-shirts
Intense Competition
The Apparel Industry is fragmented and highly competitive. There are a number of major players, many niche stores and private
companies that cater to specific demographics. Also, general merchandisers and foreign companies bring more competition to
the sector. Having the right product is also essential; fashion trends change frequently, and companies need to adapt to varying
consumer tastes quickly.
Industry Outlook
In view of the COVID19 outbreak and lowering of the discretionary spending by the consumers in these times of economic
downturn, the outlook for the Indian players in retail sector is ‘Negative’ in the short to medium term. The impact on demand,
which is expected to remain, muted at least for the next three or four quarters, will be more in case of players with presence
in non-essential items and luxury segments. However, the expected support from the government in terms of financial stimulus
packages and wage support subsidy as well as rental waivers from the mall-owners which would help the retailers to bring
down their fixed costs, will reduce the impact on their credit profile to an extent. The retailers with presence in essential
commodities continue to have some cash flows to support their fixed costs.
After the control of the spread of the coronavirus and post the lock-down period, the spending as well as shopping patterns of
the consumers are expected to change significantly. The consumers are likely to curtail their discretionary spending with
reduced income in their hands as well as tendency to preserve cash. Also, more preference is likely towards online channels in
order to avoid crowded spaces. In such times, the retailers with presence across the retail segments (grocery, apparel,
appliances, accessories) as well as who have an omni-channel strategy with presence in both offline and online channels are
expected to have a quicker recovery.
Liquidity: Adequate - Liquidity is marked by weak accruals against negligible repayment obligations. The company has asset
light business model with minimal capex requirement. Current ratio is comfortable at 1.10x as on March 31st, 2020. Working
capital cycle is at high at 206 days in FY20. Its average fund-based utilization for the 12 months ended December 2020 was at
72.60%. Its current liquidity of Rs.84.50 as on January 31, 2021 crore comes entirely from unutilized working capital limits
(including SBLC limits)

Analytical approach: Standalone

Applicable Criteria
Rating Outlook and Credit Watch
Definition of Default
Short Term Instruments
Rating Methodology- Manufacturing Companies
Rating Methodology-Organised Retail Companies
Financial ratios – Non-Financial Sector
Liquidity Analysis of Non-Financial Sector Entities

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 Press Release

About the company

Incorporated in 1992 Spykar Lifestyle Private Ltd. (Spykar) is into retailing of affordable to premium denim wear in domestic
market under the brand name of ‘Spykar’. The company deals complete casual range from students to working person it
includes jeans, fashionable denims, caps, cargo’s, shirts and t-shirts. The company does not undertake manufacturing activity
of its own, but primary designing and specific is done at company’s end. The company has specification for each and every
product which is provided to the job worker for procurement and production of product. The company supervises the
manufacturing activity carried out by outsourcing vendors and itself carries on the main functions of washing and dyeing at
its own unit. Spykar has setup its washing unit at Kopar Kharine, Navi Mumbai. As on September 30, 2019 the company has
264 exclusive business outlets operating in various cities across India mainly in Metro and Tier 1, 2 & 3 cities.

Brief Financials (Rs. crore) FY19 (A) FY20 (A)

Total operating income 390.24 377.42
PBILDT 36.57 28.85
PAT 9.86 -0.81
Overall gearing (times) 2.63 2.93
Interest coverage (times) 1.74 1.11
A: Audited
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Complexity level of various instruments rated for this company: Annexure 3

Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned
Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based - LT-Cash CARE BBB-; Stable
- - - 100.00
Credit

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
1)CARE BBB;
CARE 1)CARE BBB; Stable 1)CARE BBB;
Fund-based - LT- BBB-; Stable (22-Mar-19) Stable
1. LT 100.00 -
Cash Credit Stable (09-Mar-20) 2)CARE BBB; (08-Jan-18)
Stable
(08-Jan-19)
1)Withdrawn
1)CARE A3
Non-fund-based - (22-Mar-19)
2. ST - - - - (08-Jan-18)
ST-Letter of credit 2)CARE A3
(08-Jan-19)
1)CARE A1+ (CE) 1)CARE A1+ (SO) 1)CARE A1+
Fund-based - ST- (19-Mar-20) (22-Mar-19) (SO)
3. ST - - -
Cash Credit 2)Withdrawn 2)CARE A1+ (SO) (08-Jan-18)
(19-Mar-20) (08-Jan-19)
1)Withdrawn 1)CARE A1+ (SO)
1)CARE A1+
Non-fund-based - (19-Mar-20) (22-Mar-19)
4. ST - - - (SO)
ST-Letter of credit 2)CARE A1+ (CE) 2)CARE A1+ (SO)
(08-Jan-18)
(19-Mar-20) (08-Jan-19)

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 Press Release

Annexure 3: Complexity level of various instruments rated for this company

Sr. No. Name of the Instrument Complexity Level
1. Fund-based - LT-Cash Credit Simple
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity.
Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications.

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