­Experienced management and established track record of operations

Sri Murugar Spinning Mill (SMSM) is a partnership firm incorporated in 1997 by Mr.P.V. Devaraj. The firm is engaged in manufacturing of MMF (manmade fibre) yarn and blended yarn. Yarn count ranges between Ne 30s to Ne 72s in both single and multi-fold yarn and other value- added yarns. The firm is currently managed by Mr. D. Naresh Kumar and Mrs. Prathayani Amirtham. SMSM has installed capacity of 41,856 spindles. The major raw material of the firm includes polyester staple fibre. Acuite believes that the firm will continue to benefit from the long standing experience of the management and track record of operations over the medium term.

Steady growth in Topline:
SMSM has shown an increasing trend in the topline and recorded Rs. 553.07 crore in FY 25 (prov) as against Rs. 428.92 crore in FY 2024, driven by a steady flow of orders. Out of total revenue, 23% was contributed by manufacturing activity and the remaining 77% was contributed by job work activity. SSMS has procured  raw material and provided the same to the job worker for the production of polyester yarn and blended yarn in terms of conversion charges. Out of total production, 93% is polyester yarn and 7% is blended yarn. The firm has already recorded Rs.260 crore in 5MFY26 as compared to Rs.213 crore in 5MFY25. Acuite believes that their topline will further improve, backed by continuous order book.

Average financial risk profile:

SMSM’s financial risk profile is assessed as average, underpinned by a moderately leveraged capital structure and average coverage indicators. The net worth improved to Rs.39.96 crore as on March 31, 2025 (Prov), from Rs.36.04 crore in FY24, supported by a capital infusion of Rs.2.83 crore by the partners and internal accruals. However, the gearing ratio increased to 1.81 times in FY25 (Prov.) from 1.66 times in FY24, primarily due to higher short-term borrowings and a term loan availed for extension of existing building. Interest coverage ratio (ICR) remained stable at 2.30 times in FY25 (Prov.) compared to 2.46 times in FY24, while debt service coverage ratio (DSCR) declined to 1.51 times from 2.46 times over the same period. Acuité believes SMSM’s financial profile will improve over the medium term, supported by the absence of any major debt-funded capex plans.

Efficient working capital operations
SMSM’s operations are working capital efficient, as reflected by its gross current asset (GCA) days of around 53 days in FY 25 (prov) as against 58 days in FY 24. The firm’s inventory days stood at 29 days in FY25 (Prov) as against 32 days in FY24. Debtors' days stood at 18 days in FY 25 (prov) as compared to 20 days in FY 24. Around 98% of debtors are outstanding within the 60-day bracket. SMSM offers a credit period of around 20 to 30 days to their customers. Creditor days stood at 6 days in FY 25 (prov) as compared to 16 days in FY 24. They provide payments to their suppliers in advance, or else the credit period is 10 to 15 days. Other current assets also declined to Rs.6.63 crore in FY 25 (prov) from Rs.8.93 crore in FY 24, which is also a reason for the improvement in GCA days. Acuite believes that SSMS’s working capital management will remain efficient in the medium term.

Lower Profitability:
Despite topline growth, SMSM’s profitability remained thin, with operating profit margin dipping to 3.15% in FY25 (Provisional) from 3.57% in FY24, primarily due to conversion charges paid to job workers and rising raw material costs, especially Polyester Staple Fiber (PSF), which is linked to crude oil prices and domestic demand. The firm’s PAT margin declined sharply to 0.28% in FY25 (Prov.) from 1.07% in FY24, impacted by increased depreciation and finance costs. Depreciation rose to Rs.8.05 crore in FY25 (prov) from Rs.4.65 crore in FY24, largely due to accelerated depreciation of Rs.3.58 crore claimed on the newly commissioned Rs.9.58 crore solar power plant. Finance costs also increased due to higher short-term borrowings. Additionally, the firm began accounting for tax at the entity level in FY25, unlike FY24 when tax was paid by individual partners, further straining bottom- line performance. SMSM has installed 3.3 MW windmills and a 2 MW solar plant, with 73% of unit consumption currently being met through renewable sources, expected to rise to 80–85%. Acuité believes profitability will remain subdued in the near term due to continued reliance on job work.

Highly competitive nature of industry and Susceptible to fluctuations of raw material prices.
The textile industry’s highly competitive environment presents significant challenges, potentially impacting the firm’s market position and profitability. Additionally, the business faces risks associated with the availability and fluctuation of raw material prices, which can lead to unpredictable cost structures and supply chain issues. These factors contribute to financial instability and may affect the firm's ability to maintain consistent profitability and operational efficiency.