The agency has also reaffirmed the company's short-term rating at ‘CRISIL A1+'.

CRISIL said that the ratings were placed on watch following a public announcement that Aditya Birla Fashion and Retail (ABFRL) will acquire 51% stake in TCNS and subsequently TCNS will be amalgamated into ABFRL.

Ratings were placed on ‘watch with positive implications' on account of the synergies benefit that would be accrued to TCNS; these synergies include strengthening of organizational capabilities, coverage of complementary markets and consumer segments, channel efficiencies, revenue synergies through sharing of consumer understanding and market insights, among others. This would also enable a comprehensive management of business with focus on quality, distribution and brand building thereby further strengthening the market position.

The acquisition of 51% stake in TCNS by ABFRL is yet to take place and is expected to complete in the near-to-medium term. Hence, CRISIL Ratings will continue to monitor the same. CRISIL Ratings will also continue to monitor the subsequent merger of TCNS into ABFRL which is subject to regulatory and other approvals and is likely to take around 12 months to complete.

There has been a revival in the overall operating performance of the company which had got impacted due to Covid-19 during the two fiscals ended fiscal 2022. The growth is driven by improved footfalls and improved demand backed by festive season as all stores are now fully operational. Operating margin is expected to recover to around 12-13% going forward aided by increased scale of operations.

Financial risk profile of the company has remained comfortable in absence of any long-term debt obligations supported by healthy networth estimated at around Rs 600 crore as on March 31, 2023. Supported by continuous healthy accretion to reserves and in absence of any major debt funded capex and nil long term debt obligations over the medium term, the financial risk profile of the company is expected to remain healthy.

These strengths are partially offset by large working capital requirements and exposure to intense competition in the textile garments business.

TCNS manufactures and retails ethnic and fusion women's wear. Garments are retailed through exclusive stores, multi-brand outlets, and chains such as Lifestyle, Reliance Trends, Pantaloons, and Shoppers Stop. It has 648 exclusive stores in more than 100 cities as on date.

The scrip fell 2.01% to currently trade at Rs 426.70 on the BSE.