Rating Rationale
May 15, 2025 | Mumbai
Ashnoor Textile Mills Limited
Rating outlook revised to 'Positive'; Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.80 Crore
Long Term RatingCrisil BBB-/Positive (Outlook revised from 'Stable'; Rating Reaffirmed)
Short Term RatingCrisil A3 (Reaffirmed)
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Ashnoor Textile Mills Limited (ATML) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘Crisil BBB-’ and has reaffirmed its ‘Crisil A3’ rating on the short-term bank facilities.

 

The revision in outlook reflects the belief of Crisil Ratings that the business risk profile of the company, will continue to improve over the medium term amidst the benefit arising out of the expanded production capacity with addition of new looms in April 2025, aside routine business growth driven by better volumes. Though sustenance of revenue growth amidst improving operating profitability will remain a key rating sensitivity factor. The operating margins of the company has improved to 13-14% in fiscal 2025 which is expected to sustain in the coming fiscals (~10% in fiscal 2024). Additional new looms are expected to improve the efficiency of business operations leading to low wastage during production process thus overall margins is expected to improve as reflected in the quarter-on-quarter margins in fiscal 2025. Additionally, the benefit of economies of scale with enhanced capacity owing to volumetric sales growth of 35-40% in fiscal 2025 shall sustain in coming fiscals as well.

 

The ratings continue to factor in the comfortable financial risk of the company, as indicated by healthy networth of Rs 90-100 crore and gearing below 1 time expected from fiscal 2026 onwards. Moderate bank limit utilisation of 80% on average for the 12 months through March 2025 and strong liquidity is supported by net cash accrual of Rs 16-18 crore which will be sufficient against annual debt obligation of Rs 6-7 crore. The liquidity profile continues to remain supported by current investments in liquid funds of Rs 32-33 crore as of 31st March 2025. Absence of sizeable debt funded capital expansion (capex) and healthy accretion to reserves shall further aid the financial risk profile over the medium term.

 

The ratings continue reflect the extensive experience of the promoters in the textile business and the comfortable financial risk profile of ATML. These strengths are partially offset by modest scale and working capital intensive operations.

Analytical Approach
Crisil Ratings has evaluated the standalone business and financial risk profiles of ATML.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: ATML promoters have extensive industry experience of over decades in the textile industry. Over the years, promoters have developed a sound understanding of market dynamics and healthy relations with customers and suppliers. The management has successfully expanded its installation of additional looms in April 2025 to meet the domestic as well as export demand. The extensive experience of promoters has helped the company diversify into domestic markets as export demand for terry towels from US markets is impacted in coming fiscals. The extensive experience of promoters along with diversity into the domestic market shall help the company improve its scale of operations and shall continue to support the business risk profile of the company.

 

  • Comfortable financial risk profile: Capital structure of the company has been comfortable as reflected in gearing of less than 1 times from FY2026 onwards (expected gearing as on March 31, 2025, is 0.7-0.8 times), which demonstrates sufficient headroom to take additional debt for business purposes. Going ahead, with no debt funded capital expenditure proposed to be undertaken, the capital structure is expected to remain comfortable over medium term. The debt protection metrics of the company have been comfortable with interest cover and NCAAD of more than 3 times and 0.25 times respectively in FY26. With no debt funded capital expenditure proposed to be undertaken and sustenance of operating margins in range of 13-14%, the Interest cover and NCAAD are expected to remain comfortable over medium term.

 

Weaknesses:

  • Modest scale of operations: The operating income of company has remained moderate on account of weaker demand from US Markets as with focus of company to improve their bottom line margins, the company had not reduced their selling prices of terry towels to the extent the prices of yarn got reduced, as a result of which, the competitors of the company were benefitted of some portion of their market share. In order to mitigate the risk of reduced demand from the export market, the company has started to diversify its market base by manufacturing towels for the domestic market from Q4 of FY23 which in fiscal 2025 has resulted in increased share to 30% which used to be at 15-18% in past. The company achieved a year-to-date operating income of ~Rs 137.33 crores till December 2024 and is expected to clock operating income in range of Rs 175-180 crores in FY25. Sustained improvement in scale of operations and the sustenance of operating margins would therefore remain a key rating sensitivity factor.

 

  • Working capital intensive operations: The operations of the company have been working capital intensively as reflected in GCA days historically ranging between 180-200 days for last 3 fiscals through FY25, largely driven by debtors’ days ranging between 75-90 days and inventory days ranging between 80-90 days, the same remains largely supported by creditors and bank lines. Going forward with increased scale of operations and increasing domestic market where realization from debtors is relatively higher, the working capital requirements are expected to increase. Efficient management of the working capital cycle leading to lower reliance on bank lines, amid sustained improvement in scale of operations shall therefore remain a key rating sensitivity factor.

Liquidity: Adequate

Bank limit utilisation remains at an average of 80% in the last 12 months ended March 2025. Annual net cash accruals are expected to be in the range of Rs 16-18 crores which would be sufficient to meet up with annual repayment obligations of Rs 6-7 crores over medium term. Liquid investments in mutual funds, equity shares etc of ~Rs 33.0 crores as of March 31, 2025, and is expected to be in similar range over medium term shall support the overall liquidity of the company.

 

The current ratio is expected to remain moderate at 1.2-1.4 times on March 31, 2026. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations.

Outlook: Positive

ATML business risk profile will continue to remain benefitted from its improving profitability amidst sustained volume growth

Rating sensitivity factors

Upward factors:

  • Sustained increase in operating income while maintaining the operating margins at 12-13% leading to higher-than-expected net cash accruals.
  • Sustenance of financial risk profile with efficient management of working capital cycle.

 

Downward factors:

  • Decline in revenue or operating margins, leading to net cash accruals falling below Rs 10 crores.
  • Stretch in working capital cycle or large debt funded capex adversely affecting the financial risk profile, particularly liquidity profile.

About the Company

ATML, which was set up in 1984, manufactures and exports terry towels, mainly to the US. The company is listed on the Bombay Stock Exchange and National Stock Exchange. The company is promoted by Mr Sunil Gupta.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

129.10

176.95

Reported profit after tax

Rs crore

7.44

6.12

PAT margins

%

5.76

3.46

Adjusted Debt/Adjusted Networth

Times

1.18

1.28

Interest coverage

Times

2.07

3.47

Any other information: Not applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Non-Fund Based Limit NA NA NA 4.00 NA Crisil A3
NA Packing Credit NA NA NA 50.00 NA Crisil A3
NA Long Term Loan NA NA 31-Dec-28 26.00 NA Crisil BBB-/Positive
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 76.0 Crisil BBB-/Positive / Crisil A3   -- 21-02-24 Crisil A3 / Crisil BBB-/Stable   -- 23-12-22 Crisil BBB-/Positive / Crisil A3 Crisil BBB-/Positive / Crisil A3
Non-Fund Based Facilities ST 4.0 Crisil A3   -- 21-02-24 Crisil A3   -- 23-12-22 Crisil A3 Crisil A3
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 26 Bank of Baroda Crisil BBB-/Positive
Non-Fund Based Limit 4 Bank of Baroda Crisil A3
Packing Credit 50 Bank of Baroda Crisil A3
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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