Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil AA-/Stable/Crisil A1+' ratings on the bank facilities and commercial paper of Siyaram Silk Mills Limited (SSML; part of Siyaram Group).

 

Crisil Ratings has also taken note of the announcement of issuance of cumulative non-convertible redeemable preference shares (CNCRPS) by way of a bonus to all shareholders through a Scheme of Arrangement where in total outflow in the form of shares of Rs.318 Crores in two tranche (Series I and Series II) which will be redeemed at the end of 3rd and 5th year with coupon of 9%. At the time of redemption and interest payout SSML will pay out all the obligations related CNCRPS from available liquidity.

 

Group achieved operating income of Rs.2221 crore in fiscal 2025, compared with Rs 2097 crore in fiscal 2024. This was after a decline of 6% in fiscal 2024 from Rs 2237 crore in fiscal 2023. Revenue will remain steady on account of healthy demand for fabric and readymade garments. Consolidated earnings before interest, tax, depreciation and amortization (EBITDA) margin remained at 13.50% in fiscal 2025 against 14% in fiscal 2024 owing to higher spends towards marketing and brand building

 

However, strong consolidated cash accrual of Rs 200 crore in fiscal 2025, which may increase to more than Rs 220 crore over the medium term, driven by healthy profitability and strong market position, will sufficiently cover annual debt obligation of Rs 6-7 crore and payment of coupon towards CNCRPS.1

 

At the group level, the financial risk profile will likely remain strong, albeit debt is expected to increase by Rs 318 crore due to issuance of CNCRPS . However, Group expected to maintain sufficient liquidity buffer towards payout of CNCRPS. Debt protection metrics were comfortable, with interest coverage and net cash accrual to adjusted debt (NCAAD) ratios of 13.04 times and 0.86 time respectively for fiscal 2025, as against 14.48 times and 1.15 time for fiscal 2024. This will be supported by gradual repayment of debt and improvement in profitability. The capital structure will moderate slightly, albeit remain comfortable, with gearing and total outside liabilities to tangible networth (TOL/TNW) ratio expected at 0.47-0.50 time and 0.84-0.90 time, respectively, over next two fiscals, mainly due to issuance of CNCRPS

 

The ratings continue to reflect strong financial and liquidity risk profiles of the SSML. The ratings also factor in a strong  business risk profile, focused on  textile business, and Asset-light outsourcing model. These strengths are partially offset by large working capital requirement, Susceptibility to volatile raw material prices and economic downturns and Exposure to intense competition.

Analytical Approach

For arriving at its ratings, Crisil Ratings has consolidated the business and financial risk profiles of SSML, its subsidiary Cadini SRL, Italy (a 100% subsidiary of SSML) which is strategically important to, and have a significant degree of operational integration with SSML.

 

Crisil Ratings considers these entity  as being strategic to Parent SSML in view of their strong integration with related operations.

 

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:

• Strong  business risk profile, focused on  textile business: Siyaram group operates across textile segment and generate revenue from Fabrics ,Garments and others. The business risk profile should remain supported by an established brand, strong distribution network and diversified product line. Siyaram’s is an established brand, especially in the middle-income segment; the brand is recognized pan India, and the distribution network is spread across the country. The company over the years has also set up premium brands such as J Hampstead and Cadini. Contribution from these premium brands has been growing over the years.

 

• Asset-light outsourcing model: SSML believes in outsourcing its non-critical manufacturing requirement. It outsources around 40% of its manufacturing capacity, this model provides the company with the flexibility to adopt to market dynamics and manage its fixed costs leading to consistent profitability. This flexibility has been instrumental during the lockdown period and enabled SSML to control its cost effectively to limit losses. The ability to control cost is expected to benefit SSML amidst any disruption in managing profitability.

 

Weaknesses:

• Susceptibility to volatile raw material prices and economic downturns: Prices of key inputs, polyester viscose yarn and cotton, are volatile on account of dependence on crude oil prices, seasonality, and government regulations with respect to cotton. Material cost constitutes more than 30-40% of the total cost of sales, exposing profitability to volatility in input cost. Revenue and profitability are exposed to economic downturns and government policies impacting the textile and readymade garment sectors. However, diversified product profile, integrated manufacturing operations and pricing power with suppliers will partially offset the risk involved.

 

• Exposure to intense competition: SSML operates in a highly fragmented textile industry i.e. they are in Fabric and Readymade Garment. Despite being the largest player in the fabric segment, business requires regular innovation to restrain the competition. Thus, despite operating for over four decades, the company needs to continuously invest in marketing and promoting its brands

Liquidity: Strong

Liquidity will likely remain strong, supported by expected cash accrual of Rs 200-220 crore against debt obligation of Rs 6-9 crore over the medium term. Consolidated cash and equivalent stood at Rs 212 crore as on March 31, 2025. Furthermore, SSML has access to fund-based limit of Rs 255 crore, with utilized 12-month average utilization of 54% ending March 31, 2025. Group has no major capex plans towards capacity expansion

 

ESG Profile

Crisil Ratings believes SSML’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.

 

This sector can have a significant impact on the environment owing to high water consumption, waste generation and Green House Gas (GHG) emissions. The sector’s social impact is characterized by health hazards leading to higher focus on employee safety and well-being and the impact on local community given the nature of its operation.

 

SSML has continuously focused on mitigating its environmental and social risks.

 

ESG Profile:

• The company saw a decline of ~5% CAGR in its energy consumption intensity over fiscals 2022 and 2024 to ~100 MWh per crore of revenue in fiscal 2024.
• SSML plans to reduce greenhouse gas emissions by investing in solar energy. In line with this target, the company has installed solar projects/systems of ~ 4 MWp at its operation sites. Further, it is installing a further 1 MWp solar power capacity at one of its plants
• The share of female employees was higher than its listed peers while the share of female workers was lower at ~8% and ~17%, respectively in fiscal 2024.
• SSML’s governance structure is characterized by ~50% share of independent directors on the Board, relatively low representation of women directors (~10%),100% investor complaints redressal rate and presence of extensive financial disclosures

Outlook: Stable

The business risk profile of SSML will continue to improve over the medium term supported by brand recognition, strong distribution network and healthy profitability

Rating sensitivity factors

Upward factors:

• Growth in revenues along with operating margin above 14% on sustained basis, leading to higher cash accruals.
• Improvement in the working capital cycle and sustenance of financial risk profile

 

Downward factors:

• Fall in revenue with operating margin dipping below 9% resulting in lower-than-expected cash accrual
• Stretch in the working capital cycle or large, debt-funded capex or acquisition weakens the financial risk profile

About the Group

SSPL was incorporated in 1978 and promoted by Late Shri Dhara Prasad Poddar. The business is managed by his son, Mr. Ramesh D. Poddar as Chairman and Managing Director. The company manufactures suiting and shirting fabrics, home furnishing fabrics, and garments in addition to indigo dyed yarn and knitted fabrics.

 

Operations are vertically integrated, with in-house facilities for dyeing, weaving, finishing and garmenting. The company has 13 units across 5 locations – Boisar (Maharashtra), Amravati (Maharashtra), Bhiwandi (Maharashtra), Silvassa & Dabhel (UT).

 

The company has a diverse fabric range comprising all blends such as polyester viscose, polyester wool, 100% cotton, cotton blends and linen. Main brands in the fabric division are Siyaram's, Mistair, Featherz, Cadini and J Hampstead. The ready-to-wear garments division has brands such as Oxemberg, Mozzo and J Hampstead; the furnishing fabrics section has the Casa Moda brand.

 

The company is listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)