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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 12.22 | ACUITE B+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 1.57 | - | ACUITE A4 | Reaffirmed & Withdrawn |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 13.79 | - | - |
| Rating Rationale |
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Acuité has reaffirmed and withdrawn the long term rating to ‘ACUITE B+’ (read as ACUITE B plus) and the short-term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 13.79 crore bank facilities of Shakthi Murugan Textiles (SMT).
The rating has been withdrawn on Acuite's policy of withdrawal of raitngs. The rating has been withdrawn on account of the request recieved from the company, and the NOC received from the banker. Rationale for the reaffirmation The rating reaffirmation takes into account of the improvement in the operating income of the company, The rating also draws comfort from experienced promoter and the company’s long track record in the industry. These strengths are however, offset by the working capital intensive in nature of operations along with average financial risk profile. |
| About the Company |
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SMT, established in 1999, is a Coimbatore-based partnership firm promoted by Mr. R. Murugesan, Mr. Velumani Shanmugan, Ms. Shanti Subramaniam and Mr. M. Naveen. SMT is engaged in manufacturing of cotton yarn and weaving grey fabrics. The firm is also engaged in generating wind power which used for both captive consumption and sale to TNEB. The day-to-day operations of the firm are managed by Mr. R. Murugesan and Mr. M. Naveen, partners of the firm.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of SMT to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Extensive industry experience of the promoters
The promoters have an experience of over a decade in the textile industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. Acuité believes that the experience of the promoters will continue to support the company’s growth plans going forward. Average financial risk profile The group’s average financial risk profile is marked by healthy net worth, comfortable gearing and moderate debt protection metrics. The tangible net worth has increased to Rs. 112.82 Cr. as on 31st March 2022 as compared to Rs.107.42 Cr as on 31st March 2021 due to accretion of reserves. The gearing of the group’s stood at 0.33 times as on 31st March 2022 as compared to 0.28 times as on 31st March 2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood low at 0.49 times as on 31st March 2022 as against 0.48 times as on 31st March 2021. The debt protection metrics of the group’s marked by comfortable Interest Coverage Ratio (ICR) at 2.61 times as on 31st March 2022 as compared to 6.48 times as on 31st March 2021 but moderate Debt Service Coverage Ratio at 1.23 times as on 31st March 2022 as compared to 3.20 times as on 31st March 2021. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.18 times as on 31st March 2022. Acuité believes that financial risk profile is expected to be remain average over the medium term in absence of major debt funded capex plans. |
| Weaknesses |
| Exposure to supplier concentration risk, and susceptibility to volatility in raw material prices
Supplier concentration and volatility in raw material prices continue to constrain the business risk profile. The entities in the textile manmade segment have limited price negotiation capability with their supplier due to its high dependence on them. The primary raw material comprises grey cotton, the prices of which are volatile. Because of the commoditized nature, their prices are market-driven, resulting in limited pricing flexibility with customers. Therefore, margins are susceptible to variations in raw material prices, as reflected in its fluctuating operating margin. |
| Rating Sensitivities |
| None |
| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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The firm’s liquidity position is adequate marked by comfortable current ratio at 1.90 times as on March 31, 2022 as compared to 1.30 times as on 31st March, 2021. The net cash accruals stood at Rs.9.82 Cr in FY2022 as against nil CPLTD. The cash and bank balances of the firm stood at Rs.0.21 Cr in FY2022 as compared to Rs.1.14 Cr in FY2021. The working capital-intensive nature of operations of the firm is marked by Gross Current Assets (GCA) of 107 days as on March 31, 2022 as against 156 days as on March 31, 2021. Acuité believes that going forward the firm will maintain adequate liquidity position due to steady accruals.
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| Outlook |
| Not Applicable |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 44.72 | 19.14 |
| PAT | Rs. Cr. | 7.21 | (1.06) |
| PAT Margin | (%) | 16.13 | (5.55) |
| Total Debt/Tangible Net Worth | Times | 0.17 | 0.73 |
| PBDIT/Interest | Times | 15.11 | 1.25 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: 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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