Rating Rationale
November 02, 2023 | Mumbai
 
Pasupati Spinning and Weaving Mills Limited
Ratings migrated to 'CRISIL B+/Stable/CRISIL A4'
 
Rating Action
Total Bank Loan Facilities Rated Rs.54.82 Crore
Long Term Rating CRISIL B+/Stable (Migrated from 'CRISIL B+/Stable ISSUER NOT COOPERATING*')
Short Term Rating CRISIL A4 (Migrated from 'CRISIL A4 ISSUER NOT COOPERATING*')
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
*Issuer did not cooperate; based on best-available information

 

Detailed Rationale

Due to inadequate information and in line with the Securities and Exchange Board of India guidelines, CRISIL Ratings had migrated its ratings on the bank facilities of Pasupati Spinning and Weaving Mills Ltd (PSWML) to CRISIL B+/Stable/CRISIL A4 Issuer Not Cooperating'. However, the management has subsequently started sharing requisite information for carrying out a comprehensive review of the ratings. Consequently, CRISIL Ratings is migrating its ratings on the bank facilities of PSWML to CRISIL B+/Stable/CRISIL A4.

 

The ratings continue to reflect the susceptibility to volatile raw material prices, weak debt protection metrics and large working capital requirement. These weaknesses are partially offset by the extensive experience of the promoter in the textile manufacturing industry along with diversified product profile and moderate scale of operations.

Analytical Approach

Unsecured loans (Rs 14.24 crore as on March 31, 2023) extended by the promoter have been treated as 25% debt and 75% equity as these loans are subordinated to bank debt and are expected to remain in the business over the medium term.

Key Rating Drivers & Detailed Description

Weaknesses

  • Susceptibility to volatile raw material prices

The price of the main raw material (polyester) is linked to crude oil prices, which remain volatile. Polyester is obtained from Reliance Industries Ltd directly and through dealers. Since the cost of procuring the raw material accounts for 30-40% of total production cost, even a slight variation in price can drastically impact the operating margin. The margin declined to 3.5% in fiscal 2023 from 5.8% in fiscal 2022.

 

  • Weak debt protection metrics

Debt protection metrics are likely to remain constrained by low profitability. Interest coverage ratio stood at 1.06 times and net cash accrual to total debt ratio at 0.08 time in fiscal 2023.

 

  • Large working capital requirement

The working capital cycle is likely to remain stretched and will be closely monitored. Gross current assets were around 173 days as on March 31, 2023, driven by moderate debtors of around 77 days and huge inventory of 80 days. The working capital is, however, partially supported by creditors of 58 days extended by the suppliers.

 

Strengths

  • Experience of the promoter and diversified product profile

The promoter has nearly four decades of experience in the textile manufacturing industry; his strong understanding of market dynamics and healthy relationships with vendors and customers should continue to support the business. The promoter has efficiently diversified the clientele, such that no single customer contributes more than 25% to the total revenue. The product portfolio is also varied, comprising sewing thread, reels, finished yarn and readymade garments.

 

  • Moderate scale of operations

The scale of operations marked by revenue levels improved to Rs 141.5 crore in fiscal 2023 from Rs 105.7 crore in fiscal 2022, on account of better demand and the shift of job work to manufacturing business. The company has achieved revenue of Rs 28.03 crore till June23 and expects the revenue level of Rs 140 crore for fiscal 2024.

Liquidity: Stretched

Net cash accrual, projected at Rs 2.5-3.0 crore in fiscal 2024, remains tight to meet the repayment obligation of Rs 3.5-4.0 crore. Bank limit utilization was around 80% for the 12 months through September 2023. The current ratio stood at 1.14 times as on March 31, 2023. Liquidity will remain supported by the timely, need-based funding support (unsecured loans) extended by the promoter.

Outlook: Stable

PSWML will continue to benefit from the extensive experience of its promoter.

Rating Sensitivity Factors

Upward factor

  • Steady scale up of operations, marked by growth in revenue and operating margin, leading to cash accrual above Rs 6 crore.
  • Improvement in the working capital cycle.

 

Downward factor

  • Steep decline in revenue or profitability, resulting in cash accrual below Rs 2 crore.
  • Any, large debt-funded capital expenditure.

About the Company

PSWML, incorporated in 1979 by Mr Ramesh Kumar Jain, is a New Delhi-based company that manufactures cotton yarn, polyester grey and dyed sewing thread and knitted fabric. It has a sewing thread manufacturing facility in Kala Amb (Himachal Pradesh) and polyester viscose yarn manufacturing and spinning units in Dharuhera (Haryana).

Key Financial Indicators

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

141.52

105.70

Reported profit after tax (PAT)

Rs crore

1.10

0.05

PAT margin

%

0.78

0.05

Adjusted debt/adjusted networth

Times

1.00

1.09

Interest coverage

Times

1.06

1.73

 

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

level

Rating assigned

with outlook

NA

Cash credit

NA

NA

NA

7.35

NA

CRISIL B+/Stable

NA

Cash credit

NA

NA

NA

2.24

NA

CRISIL B+/Stable

NA

Cash credit

NA

NA

NA

9.83

NA

CRISIL B+/Stable

NA

Cash credit

NA

NA

NA

1.68

NA

CRISIL B+/Stable

NA

Cash credit

NA

NA

NA

5.93

NA

CRISIL B+/Stable

NA

Cash credit

NA

NA

NA

1.03

NA

CRISIL B+/Stable

NA

Foreign bill discounting

NA

NA

NA

0.67

NA

CRISIL B+/Stable

NA

Foreign bill discounting

NA

NA

NA

0.79

NA

CRISIL B+/Stable

NA

Foreign bill discounting

NA

NA

NA

2.86

NA

CRISIL B+/Stable

NA

Letter of credit

NA

NA

NA

1.5

NA

CRISIL A4

NA

Letter of credit

NA

NA

NA

2.96

NA

CRISIL A4

NA

Letter of credit

NA

NA

NA

1.35

NA

CRISIL A4

NA

Letter of credit

NA

NA

NA

0.35

NA

CRISIL A4

NA

Letter of credit & bank guarantee

NA

NA

NA

0.8

NA

CRISIL A4

NA

Packing credit

NA

NA

NA

2

NA

CRISIL A4

NA

Proposed long-term bank loan facility

NA

NA

NA

10.66

NA

CRISIL B+/Stable

NA

Term loan

NA

NA

Mar-2025

2.82

NA

CRISIL B+/Stable

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 47.86 CRISIL B+/Stable / CRISIL A4 31-01-23 CRISIL A4 / CRISIL B+ /Stable(Issuer Not Cooperating)*   -- 30-11-21 CRISIL A4 / CRISIL B+ /Stable(Issuer Not Cooperating)* 05-08-20 CRISIL B+/Stable / CRISIL A4 CRISIL A4+ / CRISIL BB- /Stable(Issuer Not Cooperating)*
      --   --   --   -- 27-01-20 CRISIL BB-/Stable / CRISIL A4+ --
Non-Fund Based Facilities ST 6.96 CRISIL A4 31-01-23 CRISIL A4 (Issuer Not Cooperating)*   -- 30-11-21 CRISIL A4 (Issuer Not Cooperating)* 05-08-20 CRISIL A4 CRISIL A4+ (Issuer Not Cooperating)*
      --   --   --   -- 27-01-20 CRISIL A4+ --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 7.35 CRISIL B+/Stable
Cash Credit 2.24 CRISIL B+/Stable
Cash Credit 9.83 CRISIL B+/Stable
Cash Credit 1.68 CRISIL B+/Stable
Cash Credit 5.93 CRISIL B+/Stable
Cash Credit 1.03 CRISIL B+/Stable
Foreign Bill Discounting 0.67 CRISIL B+/Stable
Foreign Bill Discounting 0.79 CRISIL B+/Stable
Foreign Bill Discounting 2.86 CRISIL B+/Stable
Letter of Credit 1.5 CRISIL A4
Letter of Credit 2.96 CRISIL A4
Letter of Credit 1.35 CRISIL A4
Letter of Credit 0.35 CRISIL A4
Letter of credit & Bank Guarantee 0.8 CRISIL A4
Packing Credit 2 CRISIL A4
Proposed Long Term Bank Loan Facility 10.66 CRISIL B+/Stable
Term Loan 2.82 CRISIL B+/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Cotton Textile Industry
CRISILs Criteria for rating short term debt

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