| Sitaram Spinners Private Limited | ||||
| 'CRISIL BBB+/Stable' assigned to Bank Debt; Corporate credit rating reaffirmed at 'CRISIL BBB+/Stable' | ||||
| Rating Action | ||||
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| 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 assigned its 'CRISIL BBB+/Stable’ on the bank loan facilities of Sitaram Spinners Private Limited (SSPL) while reaffirmating its corporate credit rating at ‘CRISIL BBB+/Stable.
The rating reflects the extensive experience of the promoters in the textile business, healthy product diversity aiding scale and sustainability, and the healthy financial risk profile. These strengths are partially offset by susceptibility to volatility in raw material (cotton) prices and risks related on the ongoing project. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters have been engaged in the textile trading business in Telangana for over three decades. Backed by this experience, they set up a cotton spinning unit, under Rama Spinners (P) Ltd. in 1995, and a larger unit, under SSPL in 2005, which commenced commercial production from 2007. Over the years, the company has maintained strong relationships with various suppliers and customers, which have led to steady growth in revenue.
Healthy product diversity aiding scale and sustainability: Scale of operations remains healthy, backed by the established market position of SSPL and its experience of nearly three decades in the textile industry. The product portfolio comprises core spun spandex yarn and slub yarn, 100% cotton compact, combed and carded ring spun yarn used for both weaving and knitting, two-for-one twisters, Eli Twist and open-ended yarns.
Strong financial risk profile: Capital structure is aided by lower reliance on external debt, as reflected in moderate gearing of 0.92 time and total outside liabilities to adjusted networth ratio of 1.19 times as on March 31, 2024. With additional debt likely to be raised to fund the ongoing capital expenditure (capex), gearing and TOL/ANW are projected to be 1.14 times and 1.34 times, respectively, as on March 31, 2025.
Debt protection metrics have also been healthy due to leverage and healthy profitability. Interest coverage and net cash accrual to total debt ratios stood at 2.72 times and 0.18 time, respectively, for fiscal 2024.
Weakness: Susceptibility to volatility in raw material (cotton) prices: The textile spinning industry has several unorganised players operating with small capacities. Entry barriers are low due to limited capital and technology requirements and little differentiation in end-products. These factors will continue to exert pricing pressure over the medium term. Moreover, revenue and profitability will also remain susceptible to volatility in cotton prices.
Working capital-intensive operations: Gross current assets stood at 182.2 days as on March 31, 2024 and ranged between 111 days and 182 days over the past three fiscals, mainly due to the large inventory (comprising work-in-process and stock of finished goods).
Exposure to risks related to the ongoing project: SSPL plans to expand its operations and start UNIT-4 manufacturing facilities, along with extension of 132kv line and roof top solar installation, for which it has sought funding from lenders. The project is expected to commercialise by October 2025. As the proposed facility is under construction, the company faces project implementation risk involving scale-up of technology, which is partially offset by the experience and expertise of the promoters.
Timely completion and successful stabilisation of operations remains a key rating sensitivity factor. |
Liquidity Adequate Bank limit utilisation was low, averaging around 61% for the 12 months ended June 30, 2024. Expected cash accrual of Rs 41-60 crore should suffice to cover the term debt obligation of Rs 25-26 crore over the medium term. Current ratio was healthy at 2.09 times as on March 31, 2024 |
Outlook Stable CRISIL Ratings believes SSPL will continue to benefit from the extensive experience of its promoters in the textile industry and their established relationships with clients |
Rating sensitivity factors Upward factors
Downward factors
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About the Company About the Company SSPL was incorporated in 2005. The company manufactures cotton and polyester yarn and markets its products under the brand ‘Sitaram’. The manufacturing facility, at Wargal Mandal, Telangana, has 82,912 spindles and an installed capacity of 22,900 million tonne per annum. Operations are managed by Mr Pramod Agarwal and Mrs Priti Agarwal. |
Key Financial Indicators
*Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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