| Experienced management and long track record of operations
Star Exports benefits from the extensive industry experience of its partners, Mr. Sarfaraz Ahmed and Mrs. Shabana Ahmed, who have been associated with the leather industry for over two decades. Established in 1999, the firm has built a long operational track record in the processing and export of finished leather and has developed established relationships with its suppliers and customers over the years. Acuite believes that the promoters' experience and the firm's established presence in the leather industry will continue to support its business risk profile over the medium term.
Moderate business risk profile
The firm's operating income moderated and stood at Rs. 158.68 crore in FY2026 (Prov.) as against Rs. 161.20 crore in FY2025 and Rs. 124.98 Cr in FY2024, reflecting relatively stable business volumes despite prevailing challenges in the export-oriented leather industry. Furthermore, the firm reported revenue of Rs. 40.93 crore in Q1FY2027 as against Rs. 42.60 Cr. in Q1FY2026. The firm's profitability remains modest, characteristic of the highly competitive nature of the leather processing and export industry. The firm's revenue profile continues to be export-oriented, with exports contributing 56.03 percent of total revenue in FY2026 (Prov.), while domestic sales accounted for 43.30 percent. The operating profit margin moderated to 3.97 percent in FY2026 (Prov.) from 5.39 percent in FY2025, primarily due to increase in factory overhead expenses. The PAT margin, however, improved to 4.10 percent in FY2026 (Prov.) from 3.47 percent in FY2025. Nevertheless, the firm's profitability remains susceptible to fluctuations in processing costs, labour expenses, raw material availability, and competitive pressures in export markets. Acuite believes that the firm's ability to sustain its scale of operations, improve value addition, and enhance profitability while maintaining healthy utilisation levels and a stable customer base will remain key rating monitorable over the medium term.
Moderate financial risk profile
The financial risk profile of the firm remained moderate marked by moderate net worth, comfortable gearing and debt protection metrices. The tangible net worth of the firm stood at Rs. 42.89 Cr. as on March 31, 2026(Prov.) as compared to Rs 38.19 Cr. as on March 31, 2025 on account of accretion of profits. The total debt of the firm remained at Rs 79.87 Cr. as on March 31, 2026(Prov.) as against Rs 90.81 Cr. as on March 31, 2025. The total debt of the firm comprised of long-term debt of Rs. 0.06 Cr, unsecured loans of Rs. 52.58 Cr, short term debt of Rs 26.48 Cr. and current maturities of long-term debt of Rs. 0.94 Cr. as on March 31, 2026(Prov.). The gearing (Debt to Equity) of the firm stood at 1.86 times as on March 31, 2026(Prov.) as against Rs 2.38 times as on March 31, 2025. Further, the Total Outside Liabilities to Tangible Net Worth (TOL/TNW) ratio remained high though improved to 2.56 times as on March 31, 2026 (Prov.) from 2.79 times as on March 31, 2025. The debt protection metrics of the firm stood comfortable marked by interest coverage ratio (ICR) improved to 7.49 times as on March 31, 2026(Prov.) and debt service coverage ratio (DSCR) improved to 4.42 times as on March 31, 2026(Prov.) as against 6.82 times and 3.30 times as on March 31, 2025. Acuite believes that the financial risk profile of the firm would remain moderate over the medium term on the back of no major debt funded capex plan.
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| Working capital intensive operations
The firm's working capital intensity remained elevated during FY26(Prov.), as reflected in a high Gross Current Assets (GCA) of 211 days as on March 31, 2026 (Prov.), as compared with 186 days as on March 31, 2025. The elongation in the working capital cycle was primarily driven by higher inventory holding and debtor levels. The increase in inventory holding to 143 days as on March 31, 2026 (Prov.) from 117 days as on March 31, 2025 was driven by opportunistic procurement of leather at lower prices during June–August 2025 and accumulation of inventory following cancellation/deferment of export orders amid US tariff-related uncertainties. Debtor days increased to 60 days from 32 days owing to delayed realization of export receivables and elongated collection cycles. Creditor days increased to 104 days as on March 31, 2026 (Prov.) from 54 days as on March 31, 2025, owing to higher supplier credit availed against increased raw material procurement. The Fund based average utilization of the working capital limits of the firm remains low at ~49.40 percent for last six months ended June 2026. Acuite believes that the firm's ability to rationalise inventory levels and improve receivable realisations, resulting in a moderation of its working capital cycle will remain critical over the medium term.
Risks of withdrawal of capital by partners
SE was established as a partnership firm in 1999. Any substantial withdrawal of capital by the partners is likely to have an adverse impact on the capital structure of the firm.
Susceptibility of profitability to volatility in raw material prices and forex risk
The firm’s profitability remains highly susceptible to volatility in key raw material prices. Any sharp increase in input costs, coupled with the firm’s inability to pass on such increases to customers in a timely manner, may adversely impact operating margins. Acuite believes that the firm’s profit margins are likely to remain exposed to the fluctuations in raw material prices and forex. Exports contributed around 50%-60% of total sales in FY26 (Prov.), while imports accounted for approximately 7.00%-10.00% of procurement requirements. The firm remains exposed to foreign exchange fluctuation risk arising from its export-import operations, especially in the absence of hedging mechanism to mitigate currency volatility.
Highly competitive and fragmented industry
The leather industry in India is highly fragmented with the presence of numerous small-scale players catering to both the domestic and overseas demand, leading to intense competition. Any changes in the regulations and composition of industry likely to adversely impact the firm. Thus, intense competition may continue to constrain scalability, pricing power and profitability.
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