­Experience of promoters and established t rack record of operations
RWPL was incorporated in 2001 promoted by Mr. Lakshmanan Giri and his wife Mr. Subhagiri. The company has a competent management supported by a team of well qualified and experienced second line personnel. The promoters have presence in the textile industry for nearly two decades. This has helped in building healthy relationships with its suppliers and customers to ensure a steady raw material supply and repeat business. Further, RWPL is expected to enjoy the benefit of proximity to the cotton growing area along with the promoters’ experience and local presence is expected to aid in improving its business risk profile over the medium term. 

Moderate financial risk profile
RWPL’s financial risk profile is moderate, marked by moderate networth, capital structure and debt protection metrics. Company’s net worth stood at Rs.78.22 Cr. as on March 31, 2024 as compared to Rs. 69.76 Cr. as on March 31, 2023. Improvement in networth is on account of accretion to reserves. RWPL's capital structure is healthy marked by improving gearing and total outside liabilities to total net worth (TOL/TNW) of 0.81 times and 1.21 times respectively as on March 31, 2024 as against 0.84 times and 1.07 times as on March 31, 2023. The comfortable profitability coupled with healthy gearing levels has resulted in comfortable debt protection metrics with interest coverage of 4.67 times and Debt service reserve ratio (DSCR) of 1.61 times for FY2024 as against 4.86 times and 1.81 times, respectively, for FY2023. However, debt to EBITDA marginally deteriorated to 2.44 times as on March 31, 2024 due to increase in overall debt and marginal decline in profitability. Further, RWPL is incurring debt-funded capital expenditure to augment its installed capacity.
Going ahead, the ability of the company to maintain its financial risk profile at moderate levels in view of the debt funded capex will remain a key monitorable.

Stagnant Operating Performance
RWPL’s revenues have stagnated and stood at Rs.256.86 Cr. in FY2024 which declined marginally from Rs.258.78 Cr. in FY2023 and Rs.264.79 Cr. in FY2022. The company has been operating at full capacity which resulted in stagnant revenues. The operating profit margin remained stable in FY2024 at 10.02 percent compared to 10.30 percent of FY2023, as the power savings offset the decline in realizations. Similarly, PAT margins also remained stable at 3.29 percent in FY2024 compared to 3.64 percent in FY2023. Additionally, the company has reported revenue of Rs.186.82 Cr. in 9MFY2025, which is consistent with the revenue for the same period in previous years. Incremental revenue is expected to begin accruing from FY2026 post implementation of the capex.
Acuite believes RWPL’s ability to improve its overall operating performance will remain a key monitorable.

Moderately intensive nature of working capital operations
RWPL’s working capital operations are moderate as reflected by its gross current asset (GCA) days of 131 days during FY2024. The company maintains inventory of about 10-20 days and gives credit period of 60 days to its customers. However, the company has extended credit period till 90 days for few customers resulting in a stretch in receivables for FY2024. Simultaneously, the company has enjoyed an extension in credit period from its supplier during the year, resulting in creditor days of 42 days in FY2024 against 15 days in FY2023. However, the reliance on  working capital limits stood moderate with average utilisation  of 65 percent over the past 12 months ended November 2024. As the raw materials are seasonally available; however, manufacturing and sales operations are carried out throughout the year leading to higher intensity in working capital operations throughout the period.
Acuité believes that the working capital cycle will continue to remain in the similar range over the medium term on account of business cycle of cotton industry.

Susceptibility of the margins to volatility in raw material prices:
The RWPL’s profit margins are susceptible to fluctuations in the prices of raw materials, which affects sales realisations. Any adverse movement in the price of key raw materials, such as yarn, could have an adverse impact on the RWPL’s margins, as it may not be able to pass on the price hike to its customers owing to stiff competition. Operating margins of cotton spinners are susceptible to changes in cotton prices, which are highly volatile and commoditised product. Any abrupt change in cotton prices due to supply-demand scenario, carry-over stocks in the overseas market, and government regulations of changes in minimum support price (MSP) can lead to distortion in market prices and affect the profitability of players across the cotton value chain, including spinners.