­For arriving at this rating, Acuité has consolidated the business and financial risk profiles of LYTIPL and LWIPL together referred as ‘Lucky Group’. The consolidation is in the view of common management, similar line of business in textile processing industry, operational and financial linkages between the entities and management stated posture of extension of support with the group companies.

­Promoters’ extensive experience in textile processing industry; Established player in viscose yarn manufacturing segment
Lucky Group is engaged in the manufacturing of viscose yarn and blended fabric (i.e. a blend of viscose yarn and cotton yarn) for more than a decade. The group is promoted by Mr. P. Viswanathan, Mr. G. Rajamanickam and Mr. G. Doraisamy, Mr. Rajamanickam Saravana Prabhu who have more than three decades of experience in the textile industry. The top management is ably supported by a well-qualified and experienced team of second line of management. The group has integrated operations across the textile value chain and undertakes spinning and weaving. The group supplies to traders, garment and hosiery manufacturers in and around Erode, Tirupur, Ichalkaranji, Surat and Kolkata, enjoys longstanding relationship with its customers and suppliers. Acuite believes that the experience of the management will benefit the business risk profile over the medium term.

Strong growth in revenue and profitability driven by continued capacity expansion across the production chain
The group has registered revenue of Rs.1,423.74Cr in FY2025 (Prov.), reflecting a growth of ~25 percent on the FY2024 revenue of Rs.1,140.08. This growth was primarily supported by increased capacity and full operationalization of the capex in FY2025. Additionally, the group registered revenue of Rs.914.43Cr during the H1FY2026, which is ~10 percent higher the H1FY2025 revenue of Rs.834.11Cr and expected to register revenue in the range of 1,530Cr-1,550Cr by the end of FY2026, owing to increased production capacity. The operating profit improved marginally to 14.63 percent in FY2025 (Prov.) from 14.26 percent in FY2024, due to improved realization for fabrics and reduced power costs due to increased captive power capacity. On a standalone level, LWIPL registered operating profit margin of ~16 percent in FY2025 (Prov.), benefitting from a value-added production of slub yarn, whereas LYTIPL registered lower margin of ~10.30 percent. Additionally, during H1FY2026, the group registered operating profit margin of ~14.30 percent. However, the PAT margin declined sharply to 0.39 percent in FY2025 (Prov.) from 1.54 percent in FY2024, primarily due to higher depreciation resulted from adaption of accelerated depreciation on the net block.

Acuite believes, the revenue is expected to improve over the medium-term owing to increased production capacity, while margins are likely to improve with expectation of stable realizations and the full operationalization of the power capacity.

Moderately intensive working capital operations
The working capital operations of the group are moderately intensive in nature as reflected by gross current assets (GCA) days of 123 FY2025 (Prov.) against 122 days in FY2024, primarily supported by low inventory of 35 days in FY2025 (Prov.) against 32 days in FY2024. The group majorly uses viscose in manufacturing of yarn and fabrics, as it is man-made fibre it will be available thorough out the year irrespective of the season, this resulting in lower inventory days. Debtors days remained at 78 days in FY2025 (Prov.) compared 79 days to last year, as the group is into weaving, debtor days will be slightly elongated. Consequently, the fund based working capital limits were utilized highly at an average of ~91 percent over the past 12 months ending August 2025. Creditor days stood at 39 days in FY2025 (Prov.) against 43 days in FY2024. Acuite believes that working capital operations of the group will remain moderately intensive on elongated debtor days.

Moderate financial risk profile
The group’s financial risk profile remained moderate marked by moderate net worth, moderate gearing and above-average debt protection metrics. The net worth of the group improved to Rs.174.80Cr as of March 31, 2025 (Prov.), from Rs.170.64 Cr as of March 31, 2024, due to addition of Rs.31.94Cr unsecure loans as quasi equity and Rs.5.59Cr profit to reserves. However, there is decline of Rs.33.37Cr from reserves on account of demerger settlement of out-going promoter. Total debt level of the group remained at Rs.608.34Cr (comprising Rs.306.10Cr of long-term debt, short-term debt of 215.74Cr and current maturities of long-term debt of Rs.86.50Cr) from Rs.637.85Cr as on March 31, 2024. The debt to equity improved to 3.48 times as on March 31, 2025 (prov.) from 3.74 times as on March 31, 2024. Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 4.37 times as of March 31, 2025 (Prov.) against 4.56 times as of March 31, 2024. The adjusted gearing and adjusted TOL/TNW (arrived after adding back the difference in depreciation calculated under straight line method and accelerated depreciation method) stood at 1.89 times and 2.47 times respectively as on March 31, 2025 (Prov.). Further, interest coverage ratio (ICR) and debt service coverage ratio (DSCR) stood comfortable at 3.62 times and 1.30 times respectively, as of March 31, 2025 (Prov.) against 3.78 times and 1.40 times respectively, as of March 31, 2024. Debt to EBITDA improved marginally to 2.90 times as of March 31, 2025 (Prov.) from 3.87 times as of March 31, 2024.

The group currently has undertaken capex for additional looms worth Rs.118Cr. Out of this Rs.89Cr is funded through debt, remaining through  unsecured loans and internal accruals.  First phase of this capex is expected to be operational from March 31, 2026 and second phase in H1FY2027. Acuite believes, the financial risk profile particularly gearing and coverage indicators are expected to improve in the near to medium-term on the back of augmentation of capacities, estimated improvement in profitability and net cash accruals.

High supplier concentration risk and exposure to raw material price volatility:
Lucky Group remains exposed to supplier concentration risk, with around 72 percent of its total raw material procurement sourced from Grasim Industries Limited and Mothi Spinner Private Limited. The dependence on a limited supplier base restricts the group's bargaining flexibility and exposes it to potential supply-side disruptions or adverse changes in the pricing policies of these suppliers. Furthermore, the group's profitability is vulnerable to volatility in the prices of viscose stable fibre (VSF), which is primarily influenced by the fluctuations in wood pulp prices in the international market. Any sharp movement in input costs, particularly when not fully passed on to customers, could weigh on operating margins. However, the risk is partially mitigated by the group's established and long-term association with key suppliers, ensuring consistent availability of raw materials at competitive rates.