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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 22.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 112.06 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 1.25 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 135.31 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of 'ACUITE BBB' (read as ACUITE triple B) and the short-term rating of 'ACUITE A3+' (read as ACUITE A Three plus) on the Rs.113.31 crore bank facilities of Meera Cotton and Synthetic Mills Private Limited (MCSMPL). The outlook is ‘Stable’.
Acuité has assigned the long-term rating of 'ACUITE BBB' (read as ACUITE triple B) on the Rs.22.00 crore bank facilities of Meera Cotton and Synthetic Mills Private Limited (MCSMPL). The outlook is ‘Stable’. Rationale for reaffirmation
The rating reaffirmation takes into account the sustained operating and financial performance of MCSMPL over the last three years. The company’s operating income stood at Rs.406.06 crore in FY2023 as against Rs.327.65 Cr. in FY2022 and is expected to close the year FY2024 in the range of Rs.380-400 Cr. The YOY increase in installed capacity and enhanced production capacity with an average utilization ranging between 85-95 percent drives the improved scale of operations. Further, the operating margins marginally improved and stood at 8.40 percent in FY2023 as against 7.70 percent in FY2022.
Further, the rating also derives strength from the moderate financial risk profile of MCSMPL which is marked by moderate net worth, comfortable gearing and coverage indicators. The company’s overall gearing stood at 1.40 times as on 31 March 2023 as against 1.48 times as on 31 March 2022. The interest coverage ratio remained above-average with 4.82 times for FY2023 as against 4.51 times FY22. However, the rating is constrained by the moderate intensive working capital operations and highly fragmented and competitive industry and susceptibility of margins to raw material price fluctuation risk. |
| About the Company |
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Incorporated in the year 1994, Meera Cotton and Synthetic Mills Private Limited is a Mumbai based company. The company is headed by Mr. Jayesh Shah (Managing Director) who has been engaged with company since inception and has an experience of more than three decades in the industry. The company is engaged in the manufacturing of Texturised and twisted yarn, knitted fabrics, and garments and deals with polyester and spandex. The company has two manufacturing plants at Silvassa and Bhiwandi. The current installed capacity of texturised yarn is 24000 MT , twisted Yarn is 1200 MT and knitted fabric is 20,000 MT.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of Meera Cotton and Synthetic Mills Private Limited (MCSMPL) to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
MCSMPL was incorporated in the year 1994. The Managing Director of the company Mr. Jayesh Shah has been associated with the company since its inception and has an experience of more than three decades in the industry and is ably assisted by an experienced second line of management. The extensive experience of the directors has helped the company to maintain a healthy relationship with its customers and suppliers. The key customers of the company include names like Reliance retail Limited, Ginza Industries Limited, Karni Impex and Yash Fashion amongst others with no major concentration in revenues. The key suppliers include names like DNH Spinners Private Limited, Geelon Industries Private Limited, Filatex India Limited and International Business and Trade, to name a few. The operating income improved to Rs.406.06 Cr. in FY2023 as against from Rs.327.65 crore in FY2022 with YoY growth of 23.93 percent. The YOY increase in installed capacity and improved actual utilisation resulted in incremental operating income. The operating margin marginally improved in FY2023 and stood at 8.40 percent in FY2023 as against 7.70 percent in FY2022. The PAT margin stood at 3.88 percent in FY2023 as against 3.15 percent in FY2022. Further, the operating income stood at Rs.320.85 crore for 10MFY2024 and estimates to achieve turnover of Rs.380-400 Cr. of turnover in FY2024. Acuité believes that the company will benefit from the extensive experience of the directors along with a healthy relationship with its customer and suppliers. Moderate Financial Risk Profile The financial risk profile of the company stood moderate marked by moderate net worth, above-average coverage indicators, and moderate gearing. The net worth of the company improved and stood at Rs.74.10 crore as on 31 March 2023 as against Rs.58.33 crore as on 31 March 2022 on account of accretion in reserves. The gearing level stood at 1.40 times as on 31 March 2023 as against 1.48 times as on 31 March 2022. The total debt consists of long term debt of Rs. 36.11 Cr, Short term debt of Rs.53.47 Cr, Unsecured loans from directors of Rs.2.40 Cr and current maturities of long term debt of Rs. 11.99 Cr as on 31 March 2023. The Debt/ EBITDA improved and stood at 2.90 times as on 31 March 2023 as against 3.26 times as on 31 March 2022. Total outside liabilities to Tangible net worth (TOL/ TNW) stood at 1.77 times as on 31 March 2023 as against 1.83 times as on 31 March 2023. Debt protection indictors are above –average with interest coverage ratio (ICR) stood at 4.82 times as on 31 March 2023 as against 4.51 times as on 31 March 2022. Debt service coverage ratio (DSCR) stood at 2.01 times on 31 March 2023 as against 1.60 times as on 31 March 2022. Net Cash accruals / total debt (NCA/TD) ratio stood at 0.21 times in FY2023 as against 0.18 times in FY2022. Acuité believes that the financial risk profile of the company will continue to be moderate in near to medium term. |
| Weaknesses |
| Moderately Intensive working capital nature of operations
The working capital operations of the company are moderately intensive in nature marked by Gross Current Assets (GCA) in the range of 116 days for the last two years ended in FY2023. Gross current assets majorly consist of debtors. The receivables days moderately improved and stood at 73 days as on 31 March 2023 as against 82 days as on 31 March 2022. The inventory holding days stood comfortable at 30 days as on 31 March 2023 as against 26 days as on 31 March 2022. Further, the bank limit utilization stood at around moderate at 51.51 percent for fund based facilities and 54.20 percent for non-fund based facilities during the last twelve months as on January 2024. Acuite believes the working capital operations of the MCASMPL will remain intensive in nature owing to nature of operations. Highly fragmented and competitive industry and susceptibility of margins to raw material price fluctuation risk The knitted garment industry in India is highly fragmented and competitive, marked by the presence of a large number of organised and unorganised players. MCSMPL is exposed to intense competition from both domestic players as well as the established players in the overseas market. The shifts in consumption patterns can also have an adverse impact on the operations of the company. Further, the profitability of the company is susceptible to fluctuations in the prices of raw materials – polyester, spandex and other consumables. |
| Rating Sensitivities |
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| Liquidity Position: Adequate |
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Liquidity of MCSMPL is adequate marked by adequate cash accruals of Rs.21.62 crore as on 31 March 2023 against the maturing debt obligations of Rs.6.98 crore. Going ahead, the net cash accruals are expected to be in the range of Rs.22.69-30.78 core and maturing debt obligation in the range of Rs.11.99 -13.08 -10.80 crore. Further, the company maintains unencumbered cash balances of Rs.10.17 crore as on 31 March 2023. The current ratio stood moderate at 1.51 times as on 31 March 2023. The bank limit utilisation for fund based facilities stood at 51.51 percent and for non-fund based facilities 54.20 percent during the last twelve months as on January 2024.
Acuite expects the liquidity position of the company to remain at adequate level backed by adequate net cash accruals against repayment obligations. |
| Outlook: Stable |
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Acuité believes that MCSMPL will maintain a 'stable' outlook over the medium term backed by its experienced management and established track record of operation in the industry. The outlook may be revised to 'Positive’ if the company demonstrates substantial and sustained growth in its revenues and operating margins from the current levels while improving its capital structure. Conversely, the outlook may be revised to 'Negative', if the company generates lower-than- anticipated cash accruals, most likely because of a sharp decline in operating margins thereby impacting its business risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 406.06 | 327.65 |
| PAT | Rs. Cr. | 15.75 | 10.31 |
| PAT Margin | (%) | 3.88 | 3.15 |
| Total Debt/Tangible Net Worth | Times | 1.40 | 1.48 |
| PBDIT/Interest | Times | 4.82 | 4.51 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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