Sep 6, 2011
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Fitch assigns 'Fitch BB+(ind)' rating for Go Go International

Sep 6, 2011

Sept 06- Fitch Ratings has assigned India's Go Go International Private Limited (GGIPL) a National Long-Term rating of 'Fitch BB+(ind)'. The Outlook is Stable. A list of additional rating actions is given at the end of this commentary.

The ratings reflect the long experience of GGIPL's promoters in ready-made garment manufacturing and its established relationships with the leading brands like GAP (Issuer Default Rating (IDR): 'BBB-'/Stable), Levi Strauss (IDR:'B+'/Stable), Mothercare and Bestseller. Further, Fitch notes that despite majority of the company's production being exported, it demonstrated resilience during the economic slowdown (FY09-FY10) and maintained its operating profitability at moderate levels compared to its industry peers' during the same period.

The ratings remain constrained by GGIPL's high financial leverage due to its low operating margins on account of the challenging environment in its addressable markets in the developed countries. The ratings also remain constrained by the absence of any long-term contracts with customers, forex risk and government policies with respect to export incentives like duty drawback. In addition, Fitch has a negative-to-stable outlook for the Indian cotton apparel/made-ups manufacturers for 2011.

A positive rating guideline would be a significant improvement in GGIPL's revenues and profitability while it maintains financial leverage of below 3.5x. A negative guideline would be its net debt/EBITDA exceeding 6.0x.

GGIPL's turnover increased to INR1,709.4m in FY11 from INR1,473.2m in FY10, while its EBIDTA margin marginally decreased to 8.15% from 8.69% during the same period. Its net debt to EBITDA remained high at 5.15x in FY11.

GGIPL's bank facilities have been assigned ratings as follows:

- INR241.9m long-term loan: 'Fitch BB+(ind)'

- INR628m fund-based working capital limits: 'Fitch BB+(ind)'/'Fitch A4+(ind)'

- INR22m non-fund based working capital limits: 'Fitch A4+(ind)'

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