| Extensive experience of promoters and long operational track record of operations
Sri Salasar Balaji Group has a presence of more than three decades in the cotton textile industry. The day-to-day operations are actively managed by Mr. Dhiraj (Managing Director), supported by other family members who also have longstanding involvement in the cotton sector. The company’s manufacturing facility is strategically located in Mahabubnagar district, a major hub for horticulture, with abundant availability of raw cotton in close proximity. The promoters have long-standing relationships with farmers and traders, which benefits the company in terms of raw material sourcing. They have also developed strong relationships with stakeholders across the value chain, enabling repeat orders from key customers. Acuite believes that Sri Salasar Balaji Group will continue to benefit from the extensive experience of its promoters and established client relationships, which are expected to strengthen its business risk profile over the medium term.
Improvement in sales and profitability margins
The Group has achieved an operating income of Rs. 531.02 crore in FY2025 as against Rs. 514.17 crore in FY2024. The improvement is on account of improved sales volume and better price realization. Further, the group reported Rs. 723.40 crore in 11MFY26 with a Net Profit of Rs. 12.31 crore on consolidated basis. The revenue increased significantly on account of improvement in volume of sales for full pressed cotton bales and improvement in price realizations. The margins in FY2025 improved on account of moderation in operating expenses and increased income from various subsidies like power and transport subsidy. Further, PAT margins now stood at 0.54 per cent in FY2025 as against (0.32) per cent in FY2024 on account of an increase in other income (largely subsidy income), albeit high interest and depreciation costs. Acuite believes that both operating and net profit margins are likely to improve, supported by better price realizations and a reduction in finance costs over the near to medium term.
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| Moderately intensive working capital operations
The group’s working capital cycle remains moderately intensive, with GCA days of 126 days in FY2025 from 149 days in FY2024. Inventory days increased marginally to 61 days in FY2025 from 58 days in FY2024, and the group typically maintains inventory for about 40–45 days. Debtor days improved to 45 days in FY2025 from 71 days in FY2024, as the group largely operates on a 100 per cent cash basis, though credit of 15–20 days is occasionally extended to customers. However, creditor days reduced to 11 days in FY2025 from 40 days in FY2024, while the group generally avails a credit period of 20–30 days from suppliers. The average utilization of working capital facilities stood moderately high at ~87.84 per cent for the 6 months ended January 2026. Acuite believes that the working capital cycle of the group will remain moderately intensive over the near to medium term.
Average financial risk profile
The group’s financial risk profile remains average, characterised by modest net worth, high gearing, and average debt protection indicators. The tangible net worth improved to Rs. 43.66 crore as on 31 March 2025 from Rs. 40.81 crore as on 31 March 2024. Gearing, slightly improved but remained high at 3.12 times as on 31 March 2025 from 3.53 times as on 31 March 2024. The total debt stood at Rs. 136.01 crore as on 31 March 2025, comprising Rs. 20.41 crore of long-term debt, Rs. 10.89 crore of CPLTD, Rs. 6.79 crore of unsecured loans, and Rs. 97.93 crore of short-term borrowings. Debt protection metrics remained average, with the Interest Coverage Ratio improving moderately to 1.66 times in FY2025 from 1.39 times in FY2024. However, the Debt Service Coverage Ratio (DSCR) remained low at 1.08 times in FY2025. Acuite believes that the group's financial risk profile will remain average, supported by a stable net worth base but constrained by high gearing and modest debt protection metrics.
Susceptibility of profitability to volatility in raw material prices in a highly competitive and fragmented industry
Cotton being a seasonal kharif crop makes ginning operations dependent on monsoon conditions, leading to volatility in raw cotton availability and prices. This price fluctuation affects operating margins across the value chain, with Salasar Group’s margins remaining in the 2–3 per cent range over FY2022–25. The industry is highly competitive with low entry barriers and a large presence of organised and unorganised players, resulting in thin profitability due to the low value-additive nature of operations. Acuite believes that the group’s profitability will remain vulnerable to raw cotton price volatility and intense industry competition, given the seasonal nature of the crop and limited value addition in ginning and spinning.
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