CARE Ratings Ltd. has reaffirmed Faze Three Limited's (FTL) long-term and short-term bank facilities aggregating ₹280.00 crore. The long-term facilities are rated CARE A; Stable, and the short-term facilities are rated CARE A1. This reaffirmation follows an earlier placement of FTL's ratings under Rating Watch with Negative Implications in September 2025 due to uncertainty surrounding US tariffs on textile imports. The rating rationale highlights a significant improvement in FTL's scale of operations, with revenue growing by approximately 34% year-on-year to ₹923 crore in FY26 from ₹690 crore in FY25. This growth was achieved despite geopolitical uncertainties and trade tariff challenges, supported by increased sales volume and new product additions. However, the company's Profit Before Interest, Lease Rent, Depreciation, and Tax (PBILDT) margin moderated by approximately 300 basis points to 10.12% in FY26, as FTL absorbed part of the incremental tariffs and operational costs. CARE Ratings expects performance to sustain, aided by long-standing customer relationships. The company has invested over ₹300 crore in the last four years for capacity expansion, funded mainly through internal accruals. FTL has also received approval for the Production-Linked Incentive (PLI) scheme for man-made fibers. Key strengths noted include a comfortable capital structure with overall gearing at 0.69x and Total Outside Liabilities to Tangible Net Worth (TOL/TNW) at 0.89x in FY26, established relationships with global retailers, and an expanding product portfolio. Weaknesses include geographical concentration risk, with over 60% of revenue from exports to the US, and high working capital intensity. The outlook for Faze Three Limited is rated 'Stable', reflecting CARE Ratings' expectations that the company will maintain adequate debt coverage metrics in the medium term, benefiting from its industry presence and customer relationships.
