­Gujarat-based, SSPL was incorporated in 2012. At present, the directors are Mr. Mohamedhasanain Husenali Narsinh, Mrs. Minajbanu Husenali Narsinh, Mr. Husenali Yusufali Narsinh and Mrs. Fatema Mohmadhasnein Narsinh. The company is engaged in the manufacturing of cotton yarns with an installed capacity of 40,000 spindles per annum (PA). The utilized capacity varies between 22-25 MT per day due to the production of various counts of yarns, i.e., 30, 34, 36, and 40. During the year, the company also added 20s count of yarns. It procures 50 percent of cotton bales from its group company Milan Ginning Pressing Private Limited (MGPL) and the rest is procured from other local ginning players in Gujarat. The company exports ~90 percent of its production to countries including Europe, Bangladesh, to name a few. Major exports are done from their sister concern- Milan Ginning Pressing Private Limited (MGPL). The manufacturing facility is located in Gujarat.

­Milan group was established in 1995 by Mr. Husenali Yusufali Narsinh. The group consists of 3 companies, namely Sustainable Spinning and Commodities Private Limited (SSPL), Milan Ginning Pressing Private Limited (MGPL) and K R Solvent (KRS). The group is engaged in manufacturing and trading of cotton yarn, cotton bales, cotton linter, cottonseed meal, cottonseed hulk and cotton seed oil

Extent of Consolidation
•Full Consolidation

Rationale for Consolidation or Parent / Group / Govt. Support
Acuité has consolidated the business and financial risk profiles of SSPL, MGPL and KRS together known as the ‘Milan Group’ (MG), to arrive at this rating. The consolidation is on account of common management, similar line of business, high level of integration and strong operational linkages.

• ­Growth in revenue with sustainability of the profitability margins.

• Any deterioration of its financial risk profile and liquidity position.

• Any elongation of the working capital cycle leading to deterioration in debt protection metrics.

The group has adequate liquidity position marked by adequate net cash accruals against its maturing debt obligations. The company generated cash accruals of Rs.15.57 crore in FY2022 compared against maturing debt obligations of Rs.15.12 crore over the same period. The cash accruals of the company are estimated to remain around Rs.21.86 – 27.71 crore during 2023-24 period while its matured debt obligations is estimated to be in the range of 13.03-16.65 crore during the same period providing cushion to meet its obligations. Furthermore, the company maintains unencumbered cash and bank balances of Rs.2.67 crore as on March 31, 2022 and the current ratio also stood moderate at 1.26 times as on March 31, 2022.

­Acuité believes that Milan Group (MG) will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and long standing presence in the industry. The outlook may be revised to 'Positive' if the group demonstrates substantial and sustained growth in its revenues from the current levels while maintaining its operating margins. Conversely, the outlook may be revised to 'Negative' in case the group registers lower than expected growth in revenues and profitability or deterioration in the financial risk profile, working capital cycle and liquidity.

­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.