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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.70 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 43.86 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 8.58 | - | ACUITE A3+ | Assigned |
| Bank Loan Ratings | 14.42 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 72.56 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and short term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) to the Rs. 58.28 crore bank facilities of Shree Ram Twistex Private Limited. The outlook is ‘Stable’.
Further, Acuité has also assigned long term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and short term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) to the Rs. 14.28 crore bank facilities of Shree Ram Twistex Private Limited. The outlook is ‘Stable’ Rationale for Rating The rating reaffirmation is on account of the company’s stable operating and financial performance. The company’s operating income grew to Rs. 229.12 Cr. in FY2024 (Prov.) as against Rs. 214.88 Cr. in FY2023. The PAT margins stood at 3.08 percent in FY2024 (Prov.) as against 1.54 percent in FY2023. Further, the gearing levels have stood consistent at 1.31 times as on March 31,2024 (Prov.) as against previous year. The rating continues to derive comfort from the extensive experience of the management. However, the rating remains constrained by highly competitive nature of the industry along with susceptibility of profitability margins to variation in raw material prices. Going ahead, the company’s ability to decrease its power consumption cost and improving its working capital operations as well as its susceptibility to volatility in the raw material prices will be a key rating monitorable. |
| About the Company |
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Shree Ram Twistex Private Limited was incorporated in 2013 by promoters Mr. B B Ramani, Mr. Kothari, Mr. Hirani, Mr. Tilala and Mr. J V Ramani. The company began its commercial operations in 2016. The company is in line of spinning cotton and manufacturing cotton yarn in the count range of 30 to 60, used in products such as denim, shirts, fabrics for suits and undergarments. The company sources all its raw materials from Saurashtra region. The company sources cotton from ginning companies and processes further into yarn and the company’s client base is majorly concentrated in Ahmedabad. The company’s spinning facility is located at Gondal near Rajkot, Gujarat with a current capacity of 27,700 spindles.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Shree Ram Twistex Private Limited to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management and established relationships with its clientele
The company is being managed by experienced directors and promoters. Collectively, they have experience across various industries, including cotton ginning and spinning, ceramics, civil and mechanical construction. The company has a team of experienced and capable professionals, having over a decade of experience in the segment, to look after the overall management. The company’s vintage has enabled it to forge healthy relationships with its customers and suppliers. The experience of promoters continues to help the company to improve its product profile and client base. Moreover, strategic location of the plant at Gondal, near Rajkot, Gujarat, a cotton growing belt, offers access to quality raw material at competitive rates, and skilled manpower. The revenue of the company stood at Rs.229.12 crore in FY2024 (Prov.) as against Rs.214.88 crore in FY2023. Acuité believes that the company will continue to benefit with the promoters experience and its established presence in the industry, improving its business risk profile over the medium term. Moderate Financial Risk Profile Shree Ram Twistex Private Limited has a moderate financial risk profile marked by moderate net worth, moderate gearing and moderate debt protection metrics. SRTPL’s net-worth marginally improved and stood at Rs. 49.64 crore in FY2024 (Prov.) against Rs. 42.58 crore as on FY2023 on account of accretion of profits to reserves. SRTPL’s gearing stood at 1.31 times as on March 31,2024 (Prov.) as well as March 31, 2023. The company’s total debt as on March 31,2024 (Prov.) stood at Rs. 64.92 crore as compared to Rs. 55.70 crores as on March 31, 2023; comprising of long-term debt of Rs.1.49 crore, short-term debt of Rs. 14.83 crore and Unsecured loans from promoters/directors of Rs. 15.61 crore. TOL/TNW stood at 1.80 times as on March 31, 2024 (Prov.). The interest coverage ratio of the company stood at 4.80 times in FY24 (Prov.) against 4.50 times in FY23. DSCR stood at 1.44 times in FY2024 (Prov.) against 1.35 times in FY2023. Acuité believes that going ahead the gearing of the company is further expected to improve and remain low over the medium term. Moderate Working capital operations Shree Ram Twistex Private Limited has moderate working capital operations with average gross current asset (GCA) days standing over 102 days during FY22 to FY24. GCA days increased to 124 days in FY2024 (Prov.) against 95 days in FY2023. Inventory days stood at 39 days in FY2024 (Prov.) against 53 days in FY2023. The debtor days stood at 71days for FY24(Prov.) against 35 days for FY23. The average credit period allowed to the customers is around 30-40 days. The creditor days of the company stood at 34 days for FY24 (Prov.) as against 29 days for FY23. The average credit period allowed by the suppliers is around 15-20 days. The average working capital utilization for fund-based limits stood at ~89.33% for the last 08 months ending March 2024. Acuité believes that the ability of SRTPL to maintain its efficient working capital cycle over the medium term will remain a key rating sensitivity factor. |
| Weaknesses |
| Susceptible to changes in input prices
The margins are highly susceptible to changes in the prices of cotton. The price of cotton is fixed by the government through the Minimum Support Price (MSP). However, the purchase price depends on the prevailing demand -supply situation which restricts bargaining power with suppliers as well. Any adverse movement of cotton prices further impacts profitability. SRTPL’s operating margins stood at 7.77 percent in FY2024 (Prov.) as against 8.07 percent in FY2023. The increase in cotton prices lead to the margin decline in operating margins. Highly competitive nature of industry The Indian textile industry is highly fragmented and competitive marked by presence of large number of organized and unorganized players. This restricts the pricing flexibility and bargaining power with its customers. Further, the operating margins are fluctuating due to the volatility in pricing of raw materials. However, the promoters’ long-established presence in the field shall enable them to pass the volatility in raw material process to its customers, further reducing the risk to a certain extent. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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Liquidity is adequately backed by SRTPL’s net cash accruals, which stood at Rs. 13.34 Cr. as on March 31, 2024 (Prov.), against maturing debt repayment obligation of Rs. 7.93 Cr. The company generated sufficient net cash accruals in the range of Rs.12.67- Rs.13.34 Crore from FY2022-24 against its maturity repayment obligations in the range of Rs. 7.36- Rs.7.97 crore in the same tenure. The cash and bank balances of the company stood at Rs. 0.18 Cr. as on March 31, 2024 (Prov.). The current ratio stood at 2.18 times as on March 31, 2024 (Prov.). However, the working capital operations of the company are moderate marked by its gross current asset (GCA) days of 124 days for FY2024 (Prov.) as against 95 days for FY2023. Current ratio stands at 1.81 times as on 31 March 2024 (Prov.). The company has maintained cash & bank balance of Rs.0.18 Cr. in FY2024 (Prov.).
Acuité believes that going forward the liquidity of SRTPL is likely to remain adequate over the medium term on account of sufficient cash accruals against its maturing debt obligations. |
| Outlook: Stable |
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Acuité believes that SRTPL will maintain a 'Stable' outlook over the medium term backed by its experienced management and established client base and supplier relationship. The outlook may be revised to 'Positive' in case of better-than-expected revenue and profitability margin leading to improvement in financial risk profile. Conversely, the outlook may be revised to 'Negative' in case of lower-than-expected revenue or profitability, or any stretch in its working capital management leading to deterioration in its financial risk profile and liquidity position.
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| Other Factors affecting Rating |
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None.
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| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 229.12 | 214.88 |
| PAT | Rs. Cr. | 7.06 | 3.31 |
| PAT Margin | (%) | 3.08 | 1.54 |
| Total Debt/Tangible Net Worth | Times | 1.31 | 1.31 |
| PBDIT/Interest | Times | 4.80 | 4.50 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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None
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| 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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