­Acuite has considered the consolidated business and financial risk profile of SJLT Textiles Private Limited and SJLT Spinning Mills Private Limited (hereinafter referred to as ‘SJLT’). The consolidation is in view of similar line of business, operational linkages and common management.

­­Experienced management and established operational track record
The group is promoted by Mr. Jagatheesan, who has around three decades of experience in the textile industry. The group was incorporated in 1994 and has gradually expanded to the present total capacity of 2.27 lakh spindles at its plants in Namakkal, Tamil Nadu. The units are located in the textile hubs of Erode, Coimbatore and Tirupur. The group has a competent management supported by a team of well qualified and experienced second-line of personnel. The promoter's experience in textile industry has helped the company build healthy relationship with its suppliers and customers, to ensure a steady raw material supply and large offtake. Acuité believes that the promoter's extensive experience in the textile industry would aid the business risk profile of the company over the medium.

Augmentation in operating performance albeit stable profitability
The group’s revenue has improved and remained in the range of ~Rs. 430.00 Cr. to Rs.445 Cr. in FY2025 (Est.) as against Rs.394.35 Cr. in FY2024. This improvement in revenue primarily attributable to change in product mix to coarser counts, resulting in 41 percent increase in yarn production at SJLT Spinning Mills and 27 percent at SJLT Textiles in FY2025. The operating profit margin is estimated to be stable in the range of 9-9.5 percent in FY2025 (Est.) against 8.88 percent in FY2024 due profitable product mix and savings from captive power usage. Acuite believes that the group’s revenue will remain in the similar range over the medium term with expected improvement in profitability due to expected incremental savings from the solar power capex undertaken during FY2025.

Healthy financial risk profile
The SJLT group’s financial risk profile remained healthy, marked by healthy net worth, low gearing and healthy debt protection metrics. As on March 31, 2025, the net worth is estimated to be in the range of Rs.295-300 Cr. as against Rs.280.81 Cr. as on March 31, 2024. This estimated improvement in net worth is due to accretion from profits to reserves. The overall debt which consists of short-term debt and unsecured loans is estimated to be the range of Rs.80Cr- Rs.82 Cr. as on March 31, 2025 (Prov.) as against Rs.77.75 Cr. as on March 31, 2024. With no major debt-funded capex expansion undertaken and estimated improvement in net worth during FY2025, the gearing and total outside liabilities to tangible net worth (TOL/TNW) levels are estimated to remain healthy range similar as of March 31, 2024 levels. Further, the debt protection metrics are estimated to remain healthy for FY2025 owing to the minimal debt repayment and low interest burden, coupled with estimated sufficient cash accruals. Debt to EBITDA is estimated to improve marginally compared to previous year, due to estimated improvement in absolute EBITDA. Acuite believes that the financial risk profile is expected to remain healthy over the medium term on account of healthy net worth and no debt funded capex plans.

Working capital intensive operations:
The operations of the group remained working capital intensive, as reflected in the gross current assets (GCA) days of 180-185 days in FY2025 (Est.) against 179 days in FY2024. The estimated elongation in GCA days is due to the stretch in inventory days, largely comprising cotton.  Given the seasonal nature of cotton procurement typically concentrated between October and March, the group stocks up cotton in the last quarter of the financial year, resulting in a estimated inventory-holding period range of 125-135 days as on March 31, 2025 (Est.). Debtor days are estimated to remain in the range of 30-35 days in FY2025 (Est.), against 32 days in FY2024, while creditor days of the group is estimated to be in the range of 15-20 days in FY2025 (Prov.), against 14 days in FY2024. The group’s reliance on bank limits remained moderate, with an average utilisation of ~33 percent in the past 12 months ending May 2025. Acuité believes that the working capital cycle will continue to remain moderately intensive over the medium term, driven by cyclical nature of the cotton industry.

Susceptibility of operating margins to volatility in cotton prices:
Yarn production depends heavily on raw materials whose prices fluctuate due to global commodity trends, government policies of changes in minimum support price (MSP) and seasonal availability. Any sharp increase may not be fully passed on to customers, impacting operating margins and affect the profitability of players across the cotton value chain, including spinners.