­Established presence in the textile industry and experienced management
MSL is promoted by Mr. Anandkumar Rengaswamy, Mr. Thangavelu Jayaraman, Mr. Thangavelu Raghuraman, Mr. Sethuraman Kalyanaraman, Mr. Parag Harkishon Udani, Mr. Hari Govind, Mr. Adithya Raghuraman, Mr. Ananthakumar Dhamavanthi and Mr. Swaminathan with more than three decades of experience in the textile industry. The company was incorporated in September 18, 1979 and commenced production in 1981, initially with an installed capacity of 11,856 spindles, which was gradually expanded to the present total capacity of 57,204 spindles at both its plants i.e. in Karnataka and Tamil Nadu. Management have more than 4 decades of experience in spinning industry and with the experience of the management MSL has emerged as a reputed spinning player in south India. Acuité believes that the promoter's extensive experience in the textile industry would aid the business risk profile of the company over the medium term.

Augmentation in operating performance 
The company’s operating income improved to Rs.178.55 Cr in FY2025 from Rs.166.86 Cr in FY2024, reflecting a year-on-year growth of around 7 percent. This growth in revenue is attributable to recovery in yarn demand for commodity counts and improvement in yarn realization rates. Further, during Q1FY2026, the company registered revenue of Rs.38.1 Cr and expected to close the year with revenue of Rs.185-195Cr. The operating profit margin improved sharply to 8.51 percent in FY2025 from a modest 0.95 percent in FY2024. The improvement in EBITDA is primarily due to improved realizations and lower raw material costs. Further, in the Q1FY2026 the company registered EBITDA margin of 4.28 percent against 3.96 percent registered during Q1FY2025 and expected to end the year with the margin of 8-9 percent. Similarly, at the net level, losses narrowed with PAT at Rs.-1.26 Cr percent in FY2025 from Rs.-9.13 Cr in FY2024. Acuite believes, the company's ability to improve its profitability amidst the volatility in raw material prices and inherently cyclical nature of the yarn spinning industry remains a key monitorable.

Moderately intensive working capital operations:
The working capital operations of MSL remained moderately intensive in nature as reflected from gross current asset days of (GCA) 116 in FY2025 against 119 days in FY2024. The elongation in GCA days is primarily due to elongated inventory days of 76 in FY2025 against 73 days in FY2024. Debtor days improved to 15 days in FY2025 from 21 days in FY2024, while creditor days stood at 69 days in FY2025 against 80 days in FY2024. The current ratio remained modest at 0.82 times as on March 31, 2025 against 0.79 times as on March 31, 2024. The company’s reliance on bank limits remained moderate with average utilization of ~73 percent over the past 6 months ending May 2025. Acuite believes, the working capital operations will remain at similar levels due to the nature of industry.

Below- average financial risk profile:
MSL’s financial risk profile remained below average with low net worth, high gearing and below average debt protection metrics. The company’s net worth stood at Rs.19.84Cr as on March 31, 2025 against Rs.21.34Cr as on March 31, 2024. The decline in net worth is due to net loss. The total debt level (comprise of Long-term loan of Rs.34.80 Cr, Unsecured loan from directors of Rs.0.50 Cr, Short-term debt of Rs.32.11 Cr and current maturities of long-term debt of Rs.11.38Cr) stood at Rs.78.79 Cr as on March 31, 2025 against Rs.81.41Cr as on March 31, 2024. The gearing and total outside liabilities to tangible net worth (TOL/TNW) remained high at 3.97 times and 5.16 times as on March 31, 2025 respectively, as compared to 3.82 times and 4.92 times as on March 31, 2024. The debt-protection metrics remained below average with interest coverage ratio (ICR) and debt service coverage ratio (DSCR) of 1.49 times and 0.64 times in FY2025 as against 0.19 times and 0.40 times in FY2024. Debt to EBITDA improved, yet remained high at 5.14 times as on March 31, 2025 against 47.39 times as on March 31, 2024. Acuite believes, the financial risk profile of the company will improve due to expected improvement in profitability.

Susceptibility of the profitability to the fluctuations in raw material prices
The profitability of  MSL remains inherently susceptibile to fluctuations in the prices of key raw material such as cotton, which account for a significant portion of its over all cost structure. Cotton prices are exposed to agro-climatic conditions, government policies and international demand-supply dynamics, leading to volatility in its price. Given the company's limited ability to fully pass on such cost escalations to customers in a highly competitive and fragmented yarn industry, any sharp rise in the raw material prices can exert pressure on operating margins.