| Experienced promoters and established track record of operations:
The KKP Group has an established track record of over four decades in the textile industry and is promoted by Mr. N. Nallathambi along with Mr. N. Satheesh Kumar and Mr. N. Subash Kumar, who possess extensive experience across various segments of the textile value chain. Over the years, the group has evolved into an integrated textile player with operations spanning spinning, weaving, processing and home textile manufacturing through Dhakshan Textiles Private Limited, KKP Spinning Mills Private Limited and KKP Fine Linen Private Limited. The group's integrated business model enables better control over product quality, operating efficiencies and supply chain management, while also supporting value addition across various stages of production. Furthermore, the group's long-standing customer relationships, established presence in export-oriented home textile products and ongoing investments towards enhancing processing capabilities strengthen its competitive position. Acuité derives comfort from the group's experienced management, established operational track record and integrated nature of operations, which are expected to continue supporting its business risk profile.
Healthy operating profitability despite moderation in revenues:
The group's consolidated operating income declined by 11.76 percent to Rs.1,049.24 Cr. in FY2026 (Prov.) from Rs.1,189.06 Cr. in FY2025, primarily on account of lower realizations in textile sector, impact of US tariff changes and lower revenues from the trading segment. However, the EBITDA margins improved to 10.83 percent in FY2026 (Prov.) from 10.07 percent in FY2025, supported by operational efficiencies and increasing contribution from value-added products; however, absolute EBITDA moderated to Rs.113.67 Cr. from Rs.119.69 Cr. Further, PAT declined to Rs.17.71 Cr. in FY2026 (Prov.) from Rs.25.53 Cr. in FY2025 due to higher finance costs and depreciation associated with the debt-funded capex. The group's operating performance has improved during 4MFY2027, reflected in consolidated revenue of Rs.416.50 Cr. as against Rs.315.29 Cr. in 4MFY2026, while EBITDA margin improved to around 11.46 percent from 10.75 percent in the corresponding period of the previous year. Acuité believes the group's profitability is expected to benefit from the ramp-up of the processing division; however, timely scaling up and stabilization of the recently commissioned capacities will remain key monitorable.
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| Intensive working capital operations:
The working capital operations of the group remained intensive in FY2026 (Prov.) as reflected by gross current asset (GCA) of 244 days as against 217 days in FY2025. The elongation in the working capital cycle was primarily on account of higher inventory levels, which increased to 149 days in FY2026 (Prov.) from 121 days in FY2025. The inventory holding remains elevated owing to addition of the inventory required for the new processing unit and the seasonal nature of cotton procurement, wherein the group procures and stores cotton during the harvesting season to support production requirements throughout the year. Further, debtor days remained at 92 days in FY2026 (Prov.) as against 92 days in FY2025. The creditor days stood at 7 days in FY2026 (prov.) against 27 days in FY2025. The elongated working capital cycle has resulted in continued reliance on bank borrowings, with average utilization of fund based working capital limits remaining high at around 86.14 percent during the 12 months ended August 2026. Acuité expects the working capital operations of the group to remain intensive over the medium term, given the inherent characteristics of the textile industry.
Average financial risk profile:
KKP Group's financial risk profile remained average marked by healthy net worth, moderate leverage and moderate debt protection metrics. The group's net worth remained largely stable at Rs.333.24 Cr. as on March 31, 2026 (Prov.) as against Rs.334.54 Cr. as on March 31, 2025. Despite profit accretion during FY2026, the net worth remained at similar levels primarily on account of the deconsolidation of KKP Garments Private Limited from the consolidated group, which resulted in a reduction in the group's equity, reserves and quasi-equity base. The group undertook significant debt-funded capex towards expansion of its processing and manufacturing capacities, resulting in an increase in total debt (comprising Rs.214.75 Cr. of long-term debt, Rs.458.52 Cr. of short-term debt and Rs.57.16 Cr. of current maturities of long-term debt) to Rs.730.43 Cr. as on March 31, 2026 (Prov.) from Rs.639.49 Cr. as on March 31, 2025. Consequently, gearing and TOL/TNW deteriorated to 2.19 times and 2.29 times, respectively, as on March 31, 2026 (Prov.) from 1.91 times and 2.16 times as on March 31, 2025. Debt-to-EBITDA increased to 6.15 times as on March 31, 2026 (Prov.) from 5.26 times as on March 31, 2025 owing to higher debt levels. The debt protection metrics also moderated, with interest coverage ratio (ICR) and debt service coverage ratio (DSCR) declining to 2.00 times and 1.12 times, respectively, in FY2026 (Prov.) from 2.28 times and 1.17 times in FY2025.
Further, the group has undertaken additional capex in KKP Spinning Mills Private Limited towards modernization of existing spindles and installation of 53 looms at a total cost of Rs.60 Cr., funded partly through a term loan of ~Rs.48 Cr. Consequently, the debt levels are expected to remain elevated in the near term until the benefits from the ongoing capex are reflected in the group's operating performance.
Acuite believes, the financial risk profile of the group will remain at similar level over the medium term with addition of debt towards capex.
Intense competition in the textile industry and exposure of profitability to raw material price volatility
The group operates in a highly competitive and fragmented textile industry, characterised by minimal product differentiation, which restricts pricing flexibility. Indian textile products face stiff competition due to the products from other countries like Bangladesh, Pakistan, Vietnam, etc in the export market. Cotton is the major raw material for the group and the profitability remains vulnerable to fluctuations in cotton prices. Cotton being an agricultural commodity, the availability and price of the same is highly dependent on agro climatic conditions and prevailing demand-supply dynamics, which limits bargaining power with the suppliers as well. Acuite believes that despite of volatility in raw material prices, KKP group will be able to sustain its operating margins around existing levels, supported by the advantages derived from its integrated operations.
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