Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 9.62 ACUITE BB | Reaffirmed & Withdrawn -
Total Outstanding Quantum (Rs. Cr) 0.00 - -
Total Withdrawn Quantum (Rs. Cr) 9.62 - -
 
Rating Rationale

Acuité has reaffirmed and withdrawn the long-term rating of ‘ACUITE BB’ (read as ACUITE double BB) on the Rs. 9.62 crore bank facilities of VST Weaves India Private Limited (VWPL). The rating withdrawal is in accordance with Acuité’s policy on withdrawal of rating. The rating is being withdrawn based on request received from the company and no due certificate received from the banker.


About the Company

Tamil Nadu-based, VWPL was incorporated in the year 2010 by Mr. Thottipalayam Thangavell Rajavelu along with his family members. The promoter has more than 3 decades of experience in textile business. The company has 4 revenue divisions. VWPL engaged in trading of polyster stable fibre, manufacturing of viscose fabric, exporting of kerchiefs via merchant exports and windmill income.
 
Analytical Approach

­Acuité has considered the standalone business and financial risk profile of VWPL to arrive at the rating. 
 

Key Rating Drivers

Strengths

• Experienced management and diversified revenue profile:
VWPL is promoted by Mr. Thottipalayam Thangavell Rajavelu along with his family members. Mr. Thottipalayam Thangavell Rajavelu is the Managing Director, who has more than 3 decades of experience in the textile industry. The promoters' extensive experience and long track record has helped the company in building established relation with its customers and suppliers over the years. The company has 4 revenue divisions –  Trading in Polyster Fibre - This is the main revenue division the company. Out of the total sales, more than 90 percent of the revenue is derived from this division. This division is engaged in trading of Polyester Staple Fiber (PSF). The company procures PSF from Bombay Dyeing and the same is sold to the spinning mills in and around Tamil Nadu region; manufacturing of viscose fabric division- The company has 100 handlooms and engaged in manufacturing of fabric which is sold domestically mainly in and around erode region; Merchant Exports - this division engaged in exporting of handkerchiefs. The company gets orders from merchant exporters and the same is given for job work and sold to merchant exporters; Wind mill income - the Company has 4 windmills with capacity of 1450 KW. The company generates around 5-10 percent of the total revenue from the balance three divisions.

• Efficient working capital management:
The working capital of the company is managed efficiently, evident from its Gross Current Assets (GCA) of 51 days as on March 31, 2021 as against 38 days as on March 31, 2020 attributable to high debtor days. The debtor days stood at 49 as on March 31, 2021 as against 37 as on March 31, 2020. Inventory days stood at 2 as on March 31, 2021 and 2020. Creditor days stood at 22 as on March 31, 2021 and 20 as on March 31, 2020. Working capital limits are utilized at 90 percent for 12 month ended January 2022.

Weaknesses

­• Moderate financial risk profile:
The financial risk profile of the company remained moderate with modest capital structure and moderate debt protection metrics. The net worth of the company stood modest at Rs.7.60 Cr as on March 31, 2021 as against Rs.6.77 Cr as on March 31, 2020. Gearing (debt to equity) stood moderate at 1.06 times as on March 31, 2021 against 1.18 times as on March 31, 2020. Marginal decline in gearing can be attributed to moderate accretion to reserves and introduction of quasi equity of Rs. 0.24 Cr. Interest coverage ratio and Debt service coverage ratio stood at 2.97 times and 1.36 times in FY2021 as against 3.58 times and 1.64 times in FY2020, respectively. Total Outside Liabilities (TOL)/Total Net worth (TNW) stood at 2.41 times as on March 31, 2021 as against 2.98 times as on March 31, 2020.

• High supplier concentration risk:
The company sources the entire part of polyster staple fiber (PSF) from Bombay Dyeing Mfg & Co. Ltd, more than 90 percent of the revenue is derived from trading PSF. VWPL’s sole dependence on Bombay Dyeing Mfg & Co. Ltd exposes it to supplier concentration risk.

Rating Sensitivities
­Not applicable.
 
Material covenants
­None.
 
Liquidity Position: Adequate
­The liquidity position of the company remained adequate with adequate net cash accruals to service its debt obligations. The NCA’s stood moderate and remained in the range of Rs. 2.39-1.53 Cr through FY2019- 2021 against the repayment obligation of Rs.0.67-1.00 Cr during the same period. The current ratio has consistently remained at an average of 1.30 times with modest working capital cycle days ~15-30 through 2019-21. The cash and bank balance stood at Rs.0.21 Cr as on March 31, 2021. The average working capital limit utilization stood at 90 percent 12-month ended January 2022.
 
Outlook: Not applicable
­
 

Particulars Unit FY 21 (Actual) FY 20 (Actual)
Operating Income Rs. Cr. 139.66 193.44
PAT Rs. Cr. 0.59 1.03
PAT Margin (%) 0.42 0.53
Total Debt/Tangible Net Worth Times 1.06 1.18
PBDIT/Interest Times 2.97 3.58
Status of non-cooperation with previous CRA (if applicable)
­None.
 
Any other information
­None.
 
Applicable Criteria
• Default Recognition - https://www.acuite.in/view-rating-criteria-52.htm
• Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
Note on complexity levels of the rated instrument
https://www.acuite.in/view-rating-criteria-55.htm

Date Name of Istruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
28 Jan 2021 Term Loan Long Term 1.47 ACUITE BB | Stable (Assigned)
Proposed Bank Facility Long Term 1.06 ACUITE BB | Stable (Assigned)
Term Loan Long Term 0.98 ACUITE BB | Stable (Assigned)
Cash Credit Long Term 3.25 ACUITE BB | Stable (Assigned)
Term Loan Long Term 2.86 ACUITE BB | Stable (Assigned)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Rating
Karur Vysya Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 3.25 ACUITE BB | Reaffirmed & Withdrawn
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 1.06 ACUITE BB | Reaffirmed & Withdrawn
Karur Vysya Bank Not Applicable Term Loan Not available Not available Not available 1.47 ACUITE BB | Reaffirmed & Withdrawn
Karur Vysya Bank Not Applicable Term Loan Not available Not available Not available 2.86 ACUITE BB | Reaffirmed & Withdrawn
Karur Vysya Bank Not Applicable Term Loan Not available Not available Not available 0.98 ACUITE BB | Reaffirmed & Withdrawn
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