Press Release May 13, 2026 SARLA PERFORMANCE FIBERS LIMITED Rating Reaffirmed

Product	Quantum (Rs. Cr) (SEBI)	Quantum (Rs. Cr) (Other FSR)	Long Term Rating	Short Term Rating	Regulated By
Bank Loan Ratings	0.00	77.00	ACUITE A | Stable | Reaffirmed	-	RBI
Bank Loan Ratings	0.00	260.00	-	ACUITE A1 | Reaffirmed	RBI
Total Outstanding	0.00	337.00	-	-	-
Total Withdrawn	0.00	0.00	-	-	-

Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.

Rating Rationale

A­cuité has reaffirmed the long-term rating of 'ACUITE A' (read as ACUITE A) and the short-term rating of ‘ACUITE A1’ (read as ACUITE A one) on the Rs. 337.00 Cr. bank facilities of Sarla Performance Fibers Limited (SPFL). The outlook is ‘Stable’. Rationale for rating The rating factors promoter’s extensive experience in the specialty yarn business and the company’s established operating track record of over three decades in the segment. The rating also factors the healthy financial risk profile, marked by a strong net worth, low gearing, comfortable debt protection metrics, and adequate liquidity position of the company. Acuité also takes note of the increase in the company’s free investments by Rs. 82.30 Cr, with investments aggregating to ~ Rs. 338.21 Cr. as on FY2026, from Rs. 255.91 Cr. in FY2025. However, the rating takes cognizance of the moderation in revenue and decline in operating margins, along with a negative PAT margin in FY2026, attributable to exceptional and one-time expenses. These include recognition of loss on investment held in the form of preference shares in the wholly owned subsidiary, Sarlaflex Inc., asset impairment, foreign exchange losses, and inventory write-offs at the subsidiary level. The rating continues to be constrained by the susceptibility of margins to volatility in raw material prices, the working capital–intensive nature of operations, and exposure to foreign exchange fluctuation risk.

About the Company

­Sarla Performance Fibers Limited (SPFL), incorporated in 1993, is engaged in the manufacturing of specialized high tenacity yarns. SPFL operates two yarn manufacturing units located in Silvassa, along with one dyeing unit in Vapi and one high tenacity twisting unit in Dadra. The company also has a global presence through its wholly owned subsidiaries—Sarla Overseas Holdings Limited (SOHL), incorporated in the British Virgin Islands, and Sarla Flex, incorporated in the United States of America—as well as a step-down subsidiary, Sarla Europe LDA, located in Portugal. Overall, SPFL has an established international footprint and exports its products to customers across 62 countries worldwide .Mr. Krishna Madhusudan Jhunjhunwala is the current managing director of the company.

About the Group

SFPL has two wholly owned subsidiaries under the name of Sarla Overseas Holdings Limited (SOHL) in the British Virgin Islands and Sarla Flex incorporated, in the United States of America and one step down subsidiary Sarla Europe LDA at Portugal. They are into similar businesses.

Unsupported Rating

­Not applicable

Analytical Approach

Extent of Consolidation

•Full Consolidation

Rationale for Consolidation or Parent / Group / Govt. Support

Acuité has considered the consolidated business and financial risk profile of Sarla Performance Fibers Limited and its subsidiaries (held directly) Sarla Overseas Holdings Limited (SOHL); Sarlaflex Inc and subsidiaries (held indirectly) Sarla Europe LDA (Subsidiary of SOHL) , Sarlaflex LLC , Sarla Estate LLC and Sarla Leverage Lender LLC  for arriving at the rating.

Key Rating Drivers

Strengths

­Experienced management and established track record in textile business and diversified clientele SPFL benefits from the extensive experience of its promoter, Mr. Krishnakumar Jhunjhunwala, with over two decades in the textile industry. The company has an established global clientele, including Fitlene SL, Page Industries, Elevate Textiles, and American & Efird, catering to diversified end-use segments such as automotive, apparel, and industrial applications. Its niche presence in high tenacity and specialty yarns further strengthens its market position , with exports contributing ~ 61% of total revenues in FY2026. Backed by experienced management and a longstanding operational track record of three decades, the company is well positioned to scale up utilisation, supporting growth in revenues and margins over the medium term. Healthy financial risk profile The company’s financial risk profile remains healthy, supported by a healthy net worth, low gearing and comfortable debt protection metrics. Tangible net worth stood at Rs. 514.42 Cr as on March 31, 2026 (including non-controlling interest of Rs. -0.11 Cr. and non-controlling preference share capital of Rs. 78.25 Cr.) compared to Rs. 489.63 Cr. as on March 31, 2025. Total debt increased to Rs. 197.78 Cr. in FY2026 from Rs. 180.73 Cr. in FY2025, primarily due to an availment of term loan of Rs. 32.50 Cr. from an NBFC for general corporate purposes. Despite the increase in debt level, gearing remained comfortable and stable at 0.38 times as on March 31, 2026. Debt protection metrics stood comfortable with interest coverage ratio at 11.00 times and debt service coverage ratio at 5.58 times in FY2026. Acuité expects the financial risk profile to remain healthy over the medium term, supported by steady accretion to reserves, absence of significant debt-funded capex and improving profitability and cash accruals.

Weaknesses

­Moderation in scale of operations ; negative PAT margins At the consolidated level, revenue stood at Rs. 401.23 Cr. in FY2026, registering a de-growth of 6.06% from Rs. 427.10 Cr. in FY2025, primarily on account of a decline in domestic sales. Operating margin moderated to 12.00% in FY2026, impacted by higher overheads and non-recurring expenses, including inventory write-off at the WOS, forex losses, and increased legal & professional charges. The company reported a net loss, with PAT margin turning negative at 3.32%, mainly due to lower operating profitability, impairment charges, and recognition of loss on sale of investment in the form of 1% Non-Cumulative Redeemable Preference Shares of Sarlaflex Inc. (WOS) with a carrying value of Rs. 78.25 Cr. However, significant generation of non-operating income of Rs. 52.37 Cr. in FY2026 (Rs. 22.73 Cr. in FY2025), primarily driven by gains on liquid investments, provided partial support to overall profitability. Sustained moderation in revenues and elevated non-recurring expenses will remain a key monitorable. Working capital intensive nature of business The company’s operations remain working capital intensive, as reflected by a high gross current assets (GCA) level of 211 days in FY2026 (190 days in FY2025) primarily driven by elevated inventory and receivables levels. The company maintains a relatively high level of raw material inventory due to its dependence on imports. Debtor days increased to 104 days in FY2026 from 83 days in FY2025 primarily due to slower domestic collections and extended credit of ~90–120 days for overseas clientele. Acuité believes that any further elongation in the working capital cycle and resultant higher reliance on working capital borrowings will remain a key credit monitorable. Susceptibility of profitability to input price volatility and forex rates The cost of production and profit margin of the company is directly linked to crude oil prices. The raw material cost constituted around 45 to 50 percent. The fluctuation in raw material cost can be attributed to the changes in crude oil price, resultant the operating margins (EBITDA) have remained fluctuating. Further, the profit margin is also susceptible to foreign exchange fluctuation risk on external borrowings wherein net loss ~Rs 17.58 Cr. reported in FY2026. However, the forex risk is naturally hedged to some extent as company export goods and also imports raw materials.

Rating Sensitivities

Potential triggers (individual or collective) for an upward rating action:

­ Growth in scale of operations above Rs 500.00 Cr coupled with improvement in profitability margins Improvement in working capital intensity

Potential triggers (individual or collective) for a downward rating action:

Dip in scale of operations below Rs 350.00 Cr or dip in operating margins below 10 percent Elongation of working capital cycle Significant increase in debt levels impacting the financial risk profile

Liquidity Position

Adequate

The company’s liquidity position remains adequate, supported by healthy cash accruals vis-à-vis its repayment obligations. Net cash accruals stood at Rs. 92.47 Cr. in FY2026, as against repayment obligations of Rs. 9.15 Cr. for the same period. Over the medium term, accruals are expected in the range of Rs. 60.00 Cr–68.00 Cr, against debt repayments of ~Rs. 10.00 Cr–18.00 Cr. Liquidity is further supported by free liquid investments of Rs. 338.21 Cr, providing significant financial flexibility, along with a current ratio of 1.22 times and cash and balance of Rs 3.08 Cr. as on March 31, 2026. However, working capital limits remained fully utilised for the past nine months ended with March-26.

Outlook-Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 26 (Actual)	FY 25 (Actual)
Operating Income	Rs. Cr.	401.23	427.10
PAT	Rs. Cr.	(13.32)	62.36
PAT Margin	(%)	(3.32)	14.60
Total Debt/Tangible Net Worth	Times	0.38	0.37
PBDIT/Interest	Times	11.00	11.47

FY2026 numbers are based on abridged financials.

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Status of non-cooperation with previous CRA (if applicable)

­Not applicable

Any Other Information

­None

Applicable Criteria

• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm

Note on complexity levels of the rated instrument

­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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 24 Feb 2025 PC/PCFC Long Term 30.00 ACUITE A | Stable (Upgraded from ACUITE BB+) Term Loan Long Term 47.00 ACUITE A | Stable (Assigned) PC/PCFC Short Term 40.00 ACUITE A1 (Upgraded from ACUITE A4+) Letter of Credit Short Term 30.00 ACUITE A1 (Upgraded from ACUITE A4+) Letter of Credit Short Term 39.00 ACUITE A1 (Upgraded from ACUITE A4+) Letter of Credit Short Term 10.00 ACUITE A1 (Assigned) PC/PCFC Short Term 20.00 ACUITE A1 (Upgraded from ACUITE A4+) PC/PCFC Short Term 10.00 ACUITE A1 (Assigned) PC/PCFC Short Term 31.00 ACUITE A1 (Upgraded from ACUITE A4+) PC/PCFC Short Term 35.00 ACUITE A1 (Upgraded from ACUITE A4+) PC/PCFC Short Term 45.00 ACUITE A1 (Assigned) 03 Feb 2025 PC/PCFC Short Term 31.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) PC/PCFC Short Term 35.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) Letter of Credit Short Term 20.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) Letter of Credit Short Term 30.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) Letter of Credit Short Term 20.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) Letter of Credit Short Term 39.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) PC/PCFC Short Term 40.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A2+) PC/PCFC Long Term 10.00 ACUITE BB+ (Downgraded & Issuer not co-operating* from ACUITE A- | Stable) 13 Nov 2023 PC/PCFC Long Term 10.00 ACUITE A- | Stable (Downgraded from ACUITE A | Stable) PC/PCFC Short Term 31.00 ACUITE A2+ (Downgraded from ACUITE A1) PC/PCFC Short Term 35.00 ACUITE A2+ (Downgraded from ACUITE A1) Letter of Credit Short Term 20.00 ACUITE A2+ (Downgraded from ACUITE A1) Letter of Credit Short Term 30.00 ACUITE A2+ (Downgraded from ACUITE A1) Letter of Credit Short Term 20.00 ACUITE A2+ (Downgraded from ACUITE A1) Letter of Credit Short Term 39.00 ACUITE A2+ (Downgraded from ACUITE A1) PC/PCFC Short Term 40.00 ACUITE A2+ (Downgraded from ACUITE A1) 17 Mar 2023 PC/PCFC Long Term 10.00 ACUITE A | Stable (Reaffirmed) PC/PCFC Short Term 31.00 ACUITE A1 (Reaffirmed) PC/PCFC Short Term 35.00 ACUITE A1 (Reaffirmed) Letter of Credit Short Term 20.00 ACUITE A1 (Reaffirmed) Letter of Credit Short Term 30.00 ACUITE A1 (Reaffirmed) Letter of Credit Short Term 20.00 ACUITE A1 (Reaffirmed) Letter of Credit Short Term 39.00 ACUITE A1 (Reaffirmed) PC/PCFC Short Term 40.00 ACUITE A1 (Reaffirmed)

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*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)

­ Sr No Name of the entity 1 Sarla Performance Fibers Limited 2 Sarla Overseas Holdings Limited 3 Sarlaflex Inc 4 Sarla Europe LDA 5 Sarla Estate LLC 6 Sarla Leverage Lender LLC   7 Sarlaflex LLC

Contacts

Mohit Jain Chief Analytical Officer - Rating Operations Divya Bagmar Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

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