| Experienced management and established track record of operations
CYSPL has been engaged in cotton spinning for more than a decade. The company is promoted by Mr. C. Subramaniam along with his family members. Mr. C. Subramaniam is the managing director of the company and possesses more than 3 decades of experience in the textile industry. In the year 1992, Mr. C. Subramaniam started a firm called Chenniappa Textiles, engaged in manufacturing of fabrics. Later, in 2005, he started Chenniappa Yarn Spinners Private Limited as a part of backward integration. This helped the promoter in understanding the market dynamics. The extensive industry experience of the promoters has enabled them to establish a healthy relationship with its various customers and suppliers. The company has a total of 22,800 spindles of capacity, 336 rotors, and 2.20 megawatts (MW) windmill capacity, with solar with 3.90 MW capacity. Acuité believes that the company will sustain its existing business profile over the medium term on the back of an established track record of operations with an experienced management.
Stable scale of operations and profitability
The company continues to maintain a stable scale of operations, with operating income increasing to Rs. 102.49 crore in FY2025 from Rs. 93.16 crore in FY2024. driven primarily by higher sales volumes across cotton yarn and mélange yarn segments. During 9M FY2026 (Apr–Dec 2025), the company reported revenues of Rs. 78.28 crore, as against Rs. 74.91 crore in 9M FY2025, reflecting steady year-on-year improvement. Despite the improvement in scale, profitability remained volatile. EBITDA stood largely stable at Rs. 9.65 crore (10.35%) in FY2024 and Rs. 9.43 crore (9.20%) in FY2025, while PAT moderated to Rs. 1.40 crore in FY2025 from Rs. 1.62 crore in FY2024, impacted by elevated raw cotton prices and higher operating and finance costs, which constrained margin expansion. Acuité believes that while the company’s revenue profile is expected to remain stable over the medium term, aided by diversified yarn offerings, steady order inflows, and exposure to export-linked customers, profitability will remain susceptible to volatility in raw material prices and cost pressures inherent in the cotton spinning industry, partly mitigated by captive renewable power capacity and expectations of improved realisations.
Moderate financial risk profile
The company’s financial risk profile remains moderate, supported by modest net worth base, reduction in overall debt levels, and adequate coverage indicators. The net worth improved to Rs. 34.66 crore as on March 31, 2025, from Rs. 33.25 crore in FY2024, driven by profit accretion during the year. Total debt declined to Rs. 47.07 crore in FY2025 (comprising Rs. 6.57 crore of long-term borrowings, Rs. 33.97 crore of short-term borrowings, Rs. 3.59 crore of unsecured loans, and Rs. 2.94 crore of current maturities of long-term debt), compared with Rs. 54.91 crore in FY2024, reflecting reduced reliance on borrowings and controlled working capital funding. Consequently, the gearing ratio improved to 1.36x in FY2025 from 1.65x in FY2024, while the TOL/TNW ratio improved to 1.63x from 1.96x over the same period, aided by lower external liabilities and improved net worth. Debt protection metrics remain adequate, with the Interest Coverage Ratio (ICR) marginally moderating to 1.97x in FY2025 from 2.01x in FY2024, reflecting stable operating profitability amid higher finance costs. The Debt Service Coverage Ratio (DSCR) moderated to 1.05x in FY2025 from 1.25x in FY2024, due to lower-than-expected profitability and elevated interest burden, though coverage remains sufficient to meet scheduled debt obligations. Overall, Acuite expects the company’s financial risk profile to remain moderate, on the back of modest networth base and coverage indicators.
|
| Intensive working capital operations
The company’s operations remained working-capital intensive, reflected in a Gross Current Asset (GCA) of 201 days in FY2025, as against 233 days in FY2024, driven primarily by the inherently high inventory requirements of the cotton spinning business. Inventory days stood at 110 days in FY2025 from 126 days in FY2024, reflecting improved cotton procurement planning, though inventory levels remain elevated due to seasonal stocking of raw cotton and price-volatility considerations. Debtor days improved to 79 days in FY2025 from 93 days in FY2024, indicating stable receivable discipline supported by a largely repeat and established customer base, including export-oriented customers. Creditor days, however, declined to 22 days in FY2025 from 32 days in FY2024. Consequently, the overall working-capital cycle improved to 166 days in FY2025 from 187 days in FY2024, though it continues to remain elongated. Fund-based bank-limit utilisation remained high, averaging ~92.48% over the twelve months ended January 2026, underscoring continued reliance on working-capital borrowings to support operations. Acuite believes the company’s working-capital intensity will remain elevated over the medium term, consistent with the nature of the cotton spinning industry, with efficiency dependent on disciplined inventory management and timely realisation of receivables.
Susceptibility of profitability to fluctuations in raw material prices
The main raw material purchased by the company is cotton. Hence, the margins are susceptible to changes in cotton prices. Cotton, being an agricultural commodity, the availability and price of the same are highly dependent on agro-climatic conditions. Despite the prevalence of Minimum Support Price (MSP), the purchase price depends on the prevailing demand-supply situation, which limits bargaining power with the suppliers as well. CYSPL is engaged in the manufacture of fine counts, which provides some cushion from raw material price fluctuations. Acuité believes that CYSPL should be able to maintain its operating profitability around existing levels, notwithstanding the volatility in prices of its key inputs, on the back of its established position in the market.
|
