| Experienced promoters and established track record of operations
The KKP group commenced operations in 1983 with the establishment of KKP Weaving and Spinning Mills. Over the years, the promoters have expanded the business into multiple segments including spinning, weaving, knitting, stitching and production of grey fabrics. The promoters, Mr. P Nallathambi and his sons, collectively possess more than three decades of experience across the textile value chain. The group operates as a vertically integrated textile manufacturer, covering spinning of yarn to production of garments and made ups. DTPL procures cotton and viscose from various suppliers and produce compact yarn primarily for supply to group companies. The KKP group has an installed capacity of 65,000 spindles, 440 looms, 7.25 M.W of windmills and 400 Stitching machines. Such high backward integration supports better control over the raw material costs, enables production flexibility based on customer requirements and provides a competitive advantage in the industry. Acuite believes that the group will continue to benefit from its long track of operational track record, integrated operations and the extensive experience of the promoters in the textile sector.
Stable revenues and profitability
KKP group registered revenue of Rs.1189.06 Cr. in FY2025, compared to Rs.1133.44 Cr. in FY2024. During 9MFY2026, the group registered revenue of Rs.889.29 Cr. and is expected to close FY2026 with revenue of Rs.1200-1300 Cr. This stable growth in revenue is attributed to the full utilization of production capacities and efficient product mix. The group has been able to maintain stable operating profitability, with the operation margins of 10.07 percent in FY2025 against 10.49 percent in FY2024, further during the 9MFY2026, the group registered EBITDA margin of 10.9 percent. However, the PAT margin moderated marginally to 2.15 percent in FY2025 from 2.96 times in FY2024, primarily due to higher depreciation. Acuite believes, the scale of operations will improve over the medium-term, supported by the commissioning of additional looms and the dyeing unit.
|
| Above-average financial risk profile
KKP group’s financial risk profile remained above average marked by healthy net worth, moderate gearing and moderate debt protection metrics. The group’s net worth improved to Rs.334.54 Cr. as on March 31, 2025 from Rs.318.85 Cr. as of March 31, 2024, due to accretion of profits to reserves. However, quasi equity reduced by Rs.10 Cr. during FY2025 following repayment of term loans in KKP Hi-tech. The total debt (comprising Rs.168.93 Cr. of long-term debt, Rs.428.07 Cr. of Short-term debt and Rs.42.49 Cr. of current maturities of long-term debt) increased to Rs.639.49 Cr. as on March 31, 2025 from Rs.478.89 Cr. as on March 31, 2024. The increase in debt levels is primarily in fund-based working capital limits to fund the increased working capital requirements. Gearing (Debt to equity) and total outside liabilities to tangible networth (TOL/TNW) have deteriorated marginally to 1.91 times and 2.16 times respectively, as on March 31, 2025 from 1.50 times and 1.80 times as on March 31, 2024. The debt protection metrics remained moderate with interest coverage ratio (ICR) of 2.28 times and debt service coverage ratio (DSCR) of 1.17 times as on March 31, 2025. The debt to EBITDA also deteriorated to 5.26 times as on March 31, 2025 from 3.89 times as of previous year-end, due increased in short-term debt. During FY2026, the group undertook capex for installation of 66 additional looms, a processing plant (dyeing unit) and a dormitory, with an aggregate cost of around Rs.61 Cr. The capex is being funded bank debt of around Rs.51 Cr., of which around Rs.30 Cr. had been disbursed as of February 2026 and the balance ~Rs.20 Cr. expected to be disbursed before May 2026). This debt funded capex is expected to result in a marginal moderation in the group's gearing for FY2026. Acuite believes, the financial risk profile of the group will remain at similar level over the medium term with addition of debt towards capex.
Intensive working capital operations:
The working capital operations of the group remained intensive as evident through the gross current asset (GCA) of 217 days in FY2025 increased form 206 days in FY2024. The elongation in GCA days is primarily due to higher inventory levels increased to 121 days in FY2025 from 109 days in FY2024. The high inventory levels are common across the industry as the raw material i.e. cotton generally is procured during the season of October to March and will be stocked up to meet the inventory requirements for next 5-6 months. The group offers a credit period of 60-90 days its customers and enjoys a credit period of 45-60 days from its suppliers. The elongated working capital conversion cycle has led to high dependency on the fund-based working capital limits, which were utilized at an average of 90 percent in past 11 months ending February 2026. Acuite expects the working capital operations of the group to remain intensive over the medium term on account of business cycle of the industry.
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.
|
