| Shreedhar Cotsyn Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BB / Stable / CRISIL A4+ ' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BB/Stable/CRISIL A4+’ ratings on the bank facilities of Shreedhar Cotsyn Private Limited (SCPL; part of Shreedhar Group).
The ratings continue to reflect the experience of SCPL's promoters, geographically diverse customer base, efficient working capital management and comfortable debt protection metrics. These strengths are partially offset by a moderate financial risk profile and susceptibility of operating performance to changes in regulation and volatile raw material prices along with exposure to project risk. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of SCPL along with Shreedhar Spinners private limited (SSPL). This is because SCPL owns 96.67% subsidiary of SSPL and has given corporate guarantee.
Unsecured loans of Rs 10.60 crore as on March 31, 2022 have been treated as debt in the absence of track record of non-withdrawal.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Experience of promoters and geographically diverse customer base Group has established a strong position in domestic and international markets as a trader for over two decades, supported by the extensive experience of the partners and their longstanding relation with customers while successfully navigating through several business cycles over the years.
Efficient working capital management Working capital cycle is efficiently managed, as reflected in gross current assets estimated around 59 days as on March 31, 2022 on the back of debtors of around 45 days. Working capital cycle is expected to remain efficient over the medium term as well.
Comfortable debt protection metrics Group’s debt protection metrics improved in fiscal 2022 on back of better operating margin. Interest coverage and net cash accrual to adjusted debt ratio is estimated to be moderate at 4.41 times and 0.42 time, respectively in fiscal 2022. Sustenance of debt protection metrics amid debt funded capex remains to be seen.
Weakness: Moderate capital structure Modest networth estimated at Rs. 21.78 crore and high total outside liabilities to adjusted networth (TOLANW) ratio of 2.32 times as on March 31, 2022 represent moderate capital structure. Capital structure is expected to be leverage in fiscal 2023 on account of ongoing debt funded capex..
Susceptibility of operating performance to changes in regulation and volatile raw material prices Raw material accounts for majority of the total revenue, which exposes the firm to risks relating to volatility in raw material prices. Moreover, the industry is highly regulated in terms of cotton prices, export/import policies, which affects the operating performance of the group. While group’s operating margin improved from 1.6% to 5.2% on account of favourable price movement, sustenance remains to be seen.
Exposure to moderate project risk Company under its subsidiary SSPL is setting up a Cotton spinning yarn unit at Amravati, Maharashtra. Group is exposed to moderate project risk on account of same. Plant is expected to start in October 2022. Timely completion of capex without major cost overrun will remain monitorable. |
Liquidity: Stretched Bank limit utilisation averaged at around 89.1 percent for the past twelve months ended March 2022. Cash accruals are expected to be over Rs 7 crores which are sufficient against term debt obligation of Rs 1-6 crores over the medium term. In addition, it will be act as cushion to the liquidity of the company. Liquidity is also supported by unsecured loans infused by promoters of Rs 10.60 crore as on March 31, 2022. Cash and bank balance are estimated around 5.7 crore as on March 31, 2022. Company has done capex for building up new setup for SSPL. Current ratio are moderate at 1.56 times on March 31, 2022. |
Outlook Stable CRISIL Ratings believes SCPL will continue to benefit from the extensive experience of its promoters. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company SCPL, established in 2010 in Mumbai, is a government recognised star export house that exports raw cotton and cotton yarn. Mr Dharmendra Goyal and Mr Vishal Agarwal are the promoters. |
Key Financial Indicators
*Provisional |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
|
This Annexure has been updated on 30-Jul-2022 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
|