| Long track record of operations along with experienced management
SFL has an established track record of over three decades in the manufacturing of HDPE woven fabrics and sacks. The directors also possess more than three decades of experience in the polymer industry and are supported by an experienced second line of management. The company caters to a reputed clientele, primarily comprising government entities that are leading players in the fertilizer industry. Therefore, its longstanding relationship with respective stakeholders drives the business operations of the company with regular repeat orders. Acuité believes that the long-standing experience of the management shall continue to benefit the company going forward, resulting in steady growth in the scale of operations.
Stable scale of operations
While the operating revenue stood moderated at Rs. 315.99 Cr. in FY25 as compared to Rs. 333.92 Cr. in FY24, however, it is estimated to have clocked a revenue of Rs. 347.93 Cr. in FY26 (Est) on account of increase in the volumes and realisations. Moreover, the contribution from sacks have increase to ~57% of the revenue in FY26 (as compared to ~48 percent in FY24) and subsequently, the contribution from fabrics have reduced to 43 percent from 52 percent in FY25. Further, the operating margins stood improved to 5.87 percent in FY25 (4.88 percent in FY24) owing to decrease in input costs. Moreover, the company secures the order via tendering process which makes the margins competitive in this industry. Going forward, with the uncertainty over the raw material pricing trends and partial pass on of increase in prices to customers, the management anticipates the operating margins to moderate marginally in FY27, however, is expected to remain in the range of 5-6%. Also, the company has outstanding order book of Rs. 87.53 Cr. as of May 2026.
Healthy financial risk profile
The financial risk profile of the company stood healthy, marked by healthy net worth of Rs. 156.37 Cr. as on March 31, 2025 (Rs. 146.69 Cr. as on March 31, 2024), improved on account of accretion of profits to reserves. The total debt of the company stood reduced at Rs. 22.83 Cr. in FY25 as compared to Rs. 31.68 Cr. in FY24 and therefore, the gearing (debt-equity) stood low at 0.15 times in FY25 (0.22 times in FY24). Moreover, the debt protection metrics stood healthy with interest coverage ratio of 8.30 times in FY25 (9.01 times in FY24) and debt service coverage ratio stood at 3.06 times in FY25 (2.80 times in FY24). Going forward, the financial risk profile of the company is expected to improve on account of steady cash accruals and no major debt funded capex plans.
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| Moderate working capital operations
The working capital operations of the company are moderate marked by gross current assets (GCA) of 98 days in FY25 (93 days in FY24), that are primarily driven by higher other current assets consisting of advances to suppliers and loans & advances. Further, the company maintains an average inventory period of raw materials for 45 days and therefore, the inventory levels stood at 61 days in FY25 (56 days in FY24). The debtor levels stood at 23 days in FY25 (18 days in FY24) wherein, the company provides an average credit period of 15-20 days to the fertilizer customers and almost 30-45 days to the fabric customers. Further, the creditor days stood low at 3 days in FY25 as the company makes upfront payment to its suppliers.
Competitive nature of industry along with susceptibility in raw material pricing trends
The company operates in a highly price sensitive domestic market that is largely fragmented with the presence of several smaller players, which restricts its pricing flexibility. The company procures orders via tenders and so they need to strategically price their products to make their bids successful. Further, the major raw material for the company is polypropylene plastic granules which is a crude oil derivative. Therefore, any changes in the crude oil prices owing to ongoing geo-political situations impacts the pricing of the raw material which continues to constrain its ability to pass on the fluctuations. Hence, profitability remains susceptible to adverse fluctuations in raw material cost.
Acuité believes that the fluctuations in the raw material pricing resulting in volatile margins will remain a key rating sensitivity.
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