Experienced management and long track record of operations SML:
The company was initially engaged in trading of polyester films. Later in 2012, the company backward integrated and started the manufacturing of polyester films, metallized and lacquered polyester among others. The company is promoted by Mr. Pragnesh Jariwala, Founder and Managing Director, who brings over two decades of industry experience and oversees overall operations, supported by Mr. Dharmesh Jariwala, who manages production. The promoters’ extensive experience and established relationships with customers and suppliers have strengthened SML’s market presence and operational stability. Acuité believes the company will continue to benefit from its experienced management team and established market position of SML.

Improvement in operation:
SML’s operation performance improved in FY 2025, supported by a stable growth in operating income to Rs.1,411.18 crore from Rs.1,330.66 crore in FY 2024, driven by higher average price realization and increased export demand from European markets. The EBITDA margin strengthened significantly to 15.30% from 5.84%, aided by lower raw material costs. A reduction in power expenses following the commissioning of a 23.1 MW solar plant is expected to enhance cost efficiency and sustain margins going forward. In contrast, FY 2024 performance was adversely impacted by elevated crude-linked raw material prices, subdued demand, and competitive pressures, which constrained the company’s ability to pass on cost increases. PAT margin improved to 4.58% in FY 2025 from a negative 3.25% in FY 2024, reflecting better operating performance despite prior pressures from higher interest and depreciation costs. However, Acuité believes operational performance will continue to benefit from savings in power costs; however, volatility in crude-linked raw material prices remains a key monitorable for sustaining profitability.

Comfortable Financial Risk Profile:

The company’s financial risk profile is marked by a healthy net worth, gearing and debt protection metrics. The net worth of the company increased to Rs.726.39 crore in FY 2025 from Rs. 661.72 Cr. in FY2024 driven by internal accruals. The gearing of the company stood at 0.34 times in FY2025 against 0.45 times in FY2024. The improvement in gearing ratio is due to decrease in long term borrowings. Total borrowing structure of SML consists of Rs.198.24 crore outstanding loan from foreign banks and Rs.50.16 crores of CPLTD. Interest coverage ratio and debt service coverage ratio stood at 7.04 times and 2.54 times in FY 2025 as compared to 8.60 times and 1.62 times in FY2024. TOL/TNW (Total outside liabilities/Total net worth) stood at 0.58 times in FY 2025 as against 0.69 times in FY2024. Finance costs increased in FY 25 mainly on account of the charging of a one-time unrealized foreign exchange loss in foreign currency loans, This is a non-cash presentation entry reflecting currency fluctuations rather than an actual outflow.The debt to EBITDA of the company stood at 1.12 times in FY 2025 as compared to 3.40 times in FY 2024. Acuite believes that, financial risk profile will remain stable in the medium term in the absence of any debt funded capex plan.

Efficient working capital management
SML has demonstrated consistent efficiency in its working capital operations, with Gross Current Assets (GCA) stable at 69 day in both FY2025 and FY2024. Debtor days marginally increased to 41 days in FY2025 from 39 days in FY2024, though 55% of receivables remain within the stipulated credit period of 45–60 days, aided by the practice of collecting payments at the time of delivery. Inventory days stood at 22 days as compared to 22 days in FY 2024. Majority of their inventory consists of Raw materials. Creditor days rose to 63 in FY2025 from 55 in FY24, primarily due to high year-end purchases, which aligns with their procurement strategy involving LC-backed raw material supplies on 45–60 day terms or advance payments. Acuite believes that, working capital management will remain efficient in the medium term.

Susceptibility of profitability margins to fluctuations in prices of raw material and foreign exchange fluctuation
The basic raw materials required by SML such as polyester chips, plastic resins, granules and powder are crude oil derivatives. The prices of these commodities are subject to volatility in line with those of global crude oil prices. Further, as on date SML partly imports its raw material from Dubai, USA, and Africa, among others. Thus, it is exposed to adverse fluctuation in foreign currency exchange rates. However, SML generally enters into forward covers which partially mitigate the forex risk.

Cyclical and commoditized nature of industry
Packaging films industry is cyclical in nature with bouts of demand and supply mismatches. In case of supply overhangs, product realisations are impacted due to commoditized nature of industry. The industry has a tendency to add large capacities when prices improve leading to a situation of over-capacity vis-à-vis demand. This causes pressure on the margins of the industry players due to heightened competitive intensity and limited product differentiation.