| Siyaram Silk Mills Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA-/Positive/CRISIL A1+' | ||||||
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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 reaffirmed its 'CRISIL AA-/Positive/CRISIL A1+' rating on the long-term bank facilities and debt instruments of Siyaram Silk Mills Limited (SSML).
The positive outlook continues to reflect the stronger-than-expected operating performance in fiscal 2023, as seen in a 17% on-year growth in revenue to Rs 2,233 crore and improvement in operating margin led by robust demand. While operating performance moderated in Q1 fiscal 2024, it is expected to improve as company benefits from its diversified product mix and growing presence in the tier-2/tier-3 cities. Financial risk profile continues to remain robust.
The ratings continue to reflect established business risk profile, supported by well-known brands, strong distribution network and presence across the textile value chain. The ratings further factor in strong financial risk profile and asset-light outsourcing model. These strengths are partially offset by exposure to volatility in the price of raw material, economic downturns and intense competition. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of Siyaram Silk Mills Limited and its subsidiary Cadini SRL, Italy (a 100% subsidiary of SSML.
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 marked by established brand, strong distribution network and presence across value chain The business risk profile should remain supported by established brand, strong distribution network and diversified product line. Siyaram’s is an established brand, especially in the middle-income segment; the brand is recognised 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.
Strong financial risk profile SSML has a strong networth of Rs 1133.99 crores as of March 2023 and is expected to further improve with steady accretion to reserves. The company maintains a comfortable capital structure with efficient working capital management, scheduled repayments and the absence of any debt-funded capital expenditure (capex). Despite incremental working capital requirement in fiscal 2023, gearing and total outside liabilities to adjusted networth ratio stood at about 0.17 times and 0.44 time as on March 31, 2023, respectively. Management stance is to maintain gearing below 0.5 times. Debt protection measures were also robust with interest coverage and net cash accrual to adjusted debt ratios at above 20 times and 1.75 time in fiscal 2023, respectively. Capital structure and debt protection measures are expected to remain healthy over the medium term supported by low reliance on external debt.
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 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. Ability to control cost is expected to benefit SSML amidst the pandemic-related 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 Bank limit utilization is low at around 32 percent for the past twelve months ended Junel 2023. Cash accrual is expected to be over Rs 200 which is sufficient against term debt obligation of Rs 24 Crores over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio is healthy at 2.62 times on March 31, 2023. Company had cash and cash equivalents of Rs 129 crore as on March 31, 2023 which is expected to support the planned buyback of shares. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Positive 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
Downward factors
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About the Company 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 dyeing yarn.
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). |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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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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