­­Established presence and diverse revenue base:
ATMPL has an established presence in the textile industry spanning more than two decades and key promoter Mr. Ashok Kumar (Managing Director) has more than two decades of experience in the textile industry resulting in long relationships with suppliers and customers, driving repeat business. Further, ATMPL's diversified product base comprising cotton and various blends in the viscose yarn in the counts ranging from 30’s to 60’s, provides operational flexibility. Acuité believes that ATMPL will continue to benefit from the extensive experience of its promoters, and established relationships with clients will improve its business risk profile over the medium term.

Substantial improvement in operating profit, despite a decline in top line due to change in product focus:
ATMPL’s revenue stood at Rs.246.69 Cr. in FY2024, which was declined by 21 percent, compared to previous year’s revenue of Rs.311.22 Cr. This decline in revenue is primarily led by change in product focus and lower trading activity during the year. The company has shifted its focus from manufacturing of fabrics to yarn and also lowered the trading of madeups in order to efficiently use the input tax credit (ITC) (Since the fabrics has GST of 5 percent while the raw material has 18 percent and Yarn has 12 percent of GST). Consequently, the revenue from sale of madeups was reduced by 75 percent in FY2024 to Rs.19.32 Cr. from Rs.79.88 Cr. in FY2023 resulting in lower revenue for the year.

The operating profit margin improved significantly to 16.10 percent in FY2024, from 8.36 percent in FY2023, primarily led by the benefits from the captive power coupled by stable realizations rates for viscose yarn during the year. However, high depreciation and increased interest expenses due to infusion of interest bearing USL during the year has led to negative PAT margin for the second consecutive year. ATMPL registered revenue of Rs.138.23 Cr. till September, which is similar to previous year’s revenue during the same period. Further, EBITDA margin stood at 17.50 percent till August, there by promising a healthy profitability for the current year. Acuite expects, ATMPL’ revenue to improve in the current year due to increase in capacity, while operating profits are expected to remain at current levels.

Moderate working capital operations:
ATMPL’s working capital operations are moderately intensive in nature as reflected through the gross current days of 149 days in FY2024, which was elongated from 96 days in FY2023.  The elongation in GCA days is due to stretch in inventory days. The company also holds inventory of its newly established group firm “Ashok Textiles” resulting in stretched inventory days at 116 days in FY2024 compared to 58 days in FY2023. ATMPL extends a credit period of 20-30 days to its customers and pays the suppliers upfront which helps for discounts, resulting a lower creditor days. Consequently, the working capital limits were highly utilized at an average of 95 percent over the past 12 months ending September 2024. Acuite expects the working capital management to remain moderately intensive over the medium term on account of the high inventory levels.

Below-average financial risk profile:
ATMPL’s financial risk profile is below-average, marked by moderate net worth, high gearing and below-average debt protection metrics. The company’s net worth stood at Rs.27.34 Cr. as on March 31, 2024 against Rs.29.39 Cr. as on March 31, 2023. The decline deterioration in networth is due to net loss incurred during the period. The overall debt levels increased to Rs.228.54 Cr. as on March 31, 2024 compared to Rs.190.02 Cr. as on March 31, 2023, mainly due to infusion of Rs.55.83 Cr. unsecured loan during the year. Consequently, the leverage indicators deteriorated for the year, with gearing and total outside liabilities to tangible networth at 8.36 times and 8.65 times respectively as on March 31, 2024 from 6.47 times and 6.82 times respectively as on March 31, 2023. (The adjusted debt to equity –Net off USL stood at 6.32 times as on March 31, 2024). Further, the debt protection metrics have marginally improved yet remained low below-average with DSCR of 0.57 times and ICR of 2.15 times as on March 31, 2024. Debt to EBITDA also improved marginally to 5.47 times as on March 31, 2024 from 6.66 times as on March 31, 2023. Acuite believes that the financial risk profile of the company will improve over the medium term due to expected improvement in scale of operations and profitability.
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Susceptibility to volatility in raw material prices and supplier concentration risk
The prices of viscose staple fibre (VSF) are volatile owing to fluctuations in wood pulp prices. Any steep increase in raw material prices that cannot be fully passed on to customers will affect profitability. However, strong operational capability and healthy diversification in clientele mitigate this risk. The ATMPL sources majorly of raw material from Grasim Industries Ltd and has limited bargaining power as Grasim has an established market position in the viscose fibre segment. Though there has been no instance of shortage in supply by Grasim, risks related to supplier concentration will prevail. Acuité believes that ATMPL’s business profile and financial profile can be adversely impacted on account of presence of inherent risk of susceptibility of volatility in raw cotton prices, since the industry is highly commoditize.