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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 45.51 | ACUITE BB+ | Stable | Reaffirmed | - |
| Total Outstanding | 45.51 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating at ‘ACUITE BB+’ (read as ACUITE Double B plus) on the Rs. 45.51 Cr. bank facilities of V P N Textiles. The outlook is 'Stable'.
Rationale for reaffirmation The rating reaffirmation factors in the steady business position of the firm as reflected from its consistent operating margins over the year. The operating margin of the firm marginally improved to 13.29% in FY2024 from 12.87% in FY2023 and 11.85% in FY2022. However, the operating revenue of the firm declined to Rs. 146.31 Cr. in FY2024 from Rs. 171.16 Cr. in FY2023. The rating also draws comfort from the experienced management, moderate financial risk profile and adequate liquidity position. The rating, however, remains constrained on account of moderate nature of working capital operations, susceptibility to changes in raw material prices and risks of withdrawal of capital by partners. |
| About the Company |
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Established in the year 2014, based at Coimbatore, Tamil Nadu; V P N Textiles is engaged in manufacturing of cotton yarn. The firm is promoted by Mr. Premanand and Mrs. Sripriya Anand. Mr.Premanand boasts over a decade of expertise in textile industry and Mrs. Sripriya Anand has over years of experience in textile industry. The current manufacturing capacity is around 50,544 spindles. The firm manufactures 46’s counts of count yarn. The main raw material is cotton bales, and the firm majorly procures its raw material from Bhiwandi, Maharashtra and the remaining from Raichur, Karnataka.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of V P N Textiles to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management Improvement in profitability;albeit decline in operating revenue |
| Weaknesses |
| Moderate financial risk profile
The financial risk profile of the firm is moderate marked by moderate networth, gearing and debt protection metrics. The tangible net worth of the firm increased to Rs. 24.77 Cr. as on March 31st, 2024, as against Rs. 20.69 Cr. as on March 31st 2023 due to infusion of capital by the partners in the firm. The total debt of the firm stood at Rs. 72.40 Cr. as on March 31, 2024, as against Rs. 65.38 Cr. as on March 31, 2023. The gearing of the firm declined to 2.92 times as on March 31, 2024 from 3.16 times as on March 31,2023. Further, it is expected to improve over the medium term as the firm does not plan to incur any additional long-term loans. The TOL/TNW of the firm stood at 3.29 times as on March 31, 2024, as against 3.46 times as on March 31,2023. The debt protection metrics of the firm stood moderated reflected by debt service coverage ratio of 1.17 times for FY2024 as against 1.87 times for FY2023. The interest coverage ratio stood at 2.85 times for FY2024 as against 3.90 times for FY2023. The net cash accruals to total debt (NCA/TD) stood at 0.18 times in FY2024 as compared to 0.26 times in the previous year. Going ahead, the financial risk profile is expected to improve on account of steady accruals generation and in absence any further major debt funded capex over the medium term. Moderate working capital operations The GCA days of the firm increased to 118 days in FY2024, against 71 days in FY2023. The inventory days increased to 90 days in FY 2024 as against 46 days in FY 2023. The debtor's days stood at 6 days in FY 2024, as against 5 days in FY 2023. The creditor's days stood at 25 days as on in FY 2024, as against 12 days in FY 2023. The fund-based limits utilisation remained high at ~98.96 percent for last eight months ended November 2024. Acuite believes that the ability of the firm to improve its scale of operations without any significant elongations in the working capital cycle will be a key monitorable. Risk associated with partnership constitution Entity, being a partnership firm, is exposed to adverse capital structure risk, where any substantial capital withdrawal could negatively impact its net worth and capital structure and the liquidity position. However, during FY2024, partners made a net infusion of funds to the capital of the firm. Susceptible to changes in raw material prices The operating margins are susceptible to changes in cotton and yarn prices which are highly volatile and commoditized product. Cotton being a seasonal crop, the production of the same is highly dependent upon the monsoon. Thus, inadequate rainfall affects the availability of cotton in adverse weather conditions. Furthermore, any abrupt change in cotton prices due to supply-demand scenario and government regulations of changes in Minimum Support Price (MSP) can lead to distortion of prices and affect the profitability of players across the cotton value chain. VPN Textiles is engaged in manufacture of fine counts, which provides some protection from raw material price fluctuations. Acuite believes that V P N Textiles will be able to maintain its profitability around similar margins regardless the volatility in raw material prices. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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V P N textiles liquidity position is adequate as reflected by sufficient net cash accruals to its maturing debt obligations. The firm generated net cash accruals of Rs.12.90 Cr. in FY2024 while its maturing debt obligations stood of Rs. 10.04 Cr. during the same period. The cash accruals of the V P N textiles are estimated to remain sufficient against its repayment obligations over the medium term. The current ratio stood at 1.08 times ended with March 31, 2024. The unencumbered cash and bank balances stood negligible at Rs. 0.01 Cr. as on March 31, 2024. However, the reliance on fund-based working capital limits stood high at ~98.96 percent for the last eight months ended November 2024.
Acuité believes that going forward the firm will maintain adequate liquidity position owing to steady accruals.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 146.31 | 171.16 |
| PAT | Rs. Cr. | 0.15 | (1.20) |
| PAT Margin | (%) | 0.10 | (0.70) |
| Total Debt/Tangible Net Worth | Times | 2.92 | 3.16 |
| PBDIT/Interest | Times | 2.85 | 3.90 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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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