CRISIL has assigned its ‘B/Stable/P4’ ratings to Rajkamal Textiles’ (Rajkamal’s) bank facilities. The ratings reflect Rajkamal’s below-average financial risk profile marked by large working capital requirements, small scale of operations and vulnerability to volatility in raw material prices. These rating weaknesses are partially offset by the benefits that Rajkamal derives from its promoters’ experience in the textile industry.

Outlook: Stable
CRISIL believes that Rajkamal will continue to benefit from its promoters’ experience, over the medium term. However, the firm’s liquidity will remain constrained because of its large working capital requirements. The outlook may be revised to ‘Positive’ if Rajkamal scales up its operations and generates higher cash accruals resulting in improvement in its financial risk profile. Conversely, the outlook may be revised to ‘Negative’ if the firm’s capacities are underutilised; resulting in poor cash flows, its operating margin declines, or it undertakes a large, debt-funded capital expenditure programme over the medium term, leading to further deterioration in its financial risk profile.

About the Firm
Set up in 2002 by Mr. C Rajendran and Mrs. C Nanjammal, Rajkamal manufactures grey melange yarn. Based in Coimbatore (Tamil Nadu), the firm has capacity of 12 ring frames. It produces yarn with counts ranging from 20s to 60s.

Rajkamal reported a profit after tax (PAT) of Rs.0.7 million on net sales of Rs.117.1 million for 2008-09 (refers to financial year, April 1 to March 31), against a PAT of Rs.0.7 million on net sales of Rs.94.4 million for 2007-08.