| Established track record of operations and experienced management
Jolly group(JG) consists of three companies namely Jolly Enterprises, Jolly Spinning Mills Private Ltd And Jolly Spinners Private Ltd. The group is engaged in ginning, pressing and spinning of cotton yarn. The group is also engaged in trading of cotton yarn and cotton bales. Jolly group was established in 1997 by Mr. Ramzan Vajirai Halaniand and Mr. Chirag bharatkumar sejpal who collectively have more than three decades’ experience in cotton business. Group has an installed capacity of 20,064 spindles and primarily manufactures yarns of 20s and 40s counts. Jolly group procures raw material from local markets and exports yarn to Europe, china and Bangladesh. In terms of revenue mix JG derives 80 percent of its revenue through exports and 20 percent through sale in domestic markets. Further, JG is also doing capex for solar and wind which will reduce power cost going forward. JG group has achieved the operating revenue of Rs. 512.89 Cr in FY2022 against Rs. 498.54 Cr in FY2021. Further JG has achieved the turnover of Rs. 139.58 Cr only in November 2022.
Acuite belives that the group will continue to benefit from established presence in textile industry and extensive experience of promotors.
Moderate financial risk profile
The financial risk profile is moderate marked by healthy net worth, moderate gearing and healthy debt protection metrics. The net worth stood at Rs. 50.42 Cr as on 31 March, 2022 as against Rs. 43.93 Cr as on 31 March, 2021. The increase in net worth is majorly due to the accretion of profits to reserves. The company follows a moderate financial policy reflected through its gearing (debt-equity) which stood at 0.51 times as on 31 March, 2022 as against 1.17 times as on 31 March, 2021. The coverage indicators stood comfortable, marked by interest coverage ratio (ICR) stood at 5.53 times in FY2022 as against 3.15 times in FY2021. The DSCR stood at 1.45 times in FY2022 against 1.40 times in FY2021. The total outside liabilities to tangible net worth (TOL/TNW) stood at 0.84 times as on 31 March 2022 as against 1.54 times as on 31 March, 2021. Acuité, however, believes that the financial risk profile may continue to remain moderate despite routine capex supported by stable operating margins.
Moderate working capital management
JG's operations are working capital moderate marked by Gross Current Assets (GCA) days of 49 days in FY2022 as compared to 62 days in FY2021. The GCA days are mainly dominated by inventory holding period of 21 days in FY2022 as against 35 days in FY2021. The collection period was at 8 days in FY2022 as against 16 days in FY2021. Further the company’s average bank limit utilisation stood at ~38 percent for the last 10 months ended January 2023.
Acuite’ believes that working capital operations of the company may continue to remain moderate considering the nature of business.
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| Volatility in raw material prices and government regulations
Cotton prices are highly regulated by the government through MSP (Minimum Support Price). However, the purchase and selling prices depend on the prevailing demand-supply situation restricting bargaining power with suppliers and customers. Any adverse movement of cotton prices further impacts profitability. Acuité believes that the group 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 domestic as well as foreign market.
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