| VTM Limited | ||||||
| Long-term rating upgraded to 'Crisil A-/Stable'; Short-term rating reaffirmed | ||||||
| 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 upgraded its rating on the long term bank facilities of VTM Limited (VTM) to 'Crisil A-/Stable' from 'Crisil BBB+/Stable', while reaffirming the short term rating at ‘Crisil A2+’.
The upgrade reflects sustained improvement in VTM Ltd (VTM) credit risk profile supported by healthy operating performance. In the previous 3 years ended fiscal 2025, operating income grew at a compounded annual growth rate of about 33% supported by ramp up of operation in the home textiles segment, and the operating margin of the company have improved to 19.4 % in FY 2025 from 12.6 % in FY 2024, due home textiles segment having higher margins. The resultant larger accretions and lower debt levels have also strengthened the financial risk profile, and liquidity profile of the company.
The ratings continue to reflect VTM's established position in the grey fabric segment, and its healthy financial risk profile. These strengths are partially offset by exposure to risks stemming from intense competition and volatility in cotton prices, and large working capital requirement. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of VTM. |
Key Rating Drivers & Detailed Description Strengths: Healthy financial risk profile: The capital structure is healthy, as indicated by total outside liabilities to tangible networth (TOLTNW) ratio of 0.2 time and networth of Rs 306 crore as on 31st march 2025. The TOLTNW ratio is expected to be less than 0.5 times, with limited reliance on external debt. Debt protection metrics are robust, as reflected in interest coverage and net cash accrual to adjusted debt ratios of 37 times and 1.3 times, respectively, in fiscal 2025. These metrics are expected to be comfortable over the medium term.
Established position in the grey fabric industry: Backed by industry presence of over six decades and established market position in the cotton fabric industry, VTM caters to an extensive clientele. It derives around 60% of its revenue from the local market, and balances 40% from the export market in the fabric segment. Its favorable location provides access to yarn from neighboring districts of Tamil Nadu.
Weaknesses: Exposure to risks from volatility in cotton prices and intense competition: Cost of cotton yarn accounts for around 65% of total production cost. Since cotton prices may remain volatile, the company’s ability to pass on the higher input cost to customers depends on the global demand and competition scenario. In addition, the company faces intense competition from various players in the industry which will continue to constrain its business risk profile.
Large working capital requirement: The company had large gross current assets of 223 days and 217 days as on March 31, 2025, driven by inventory and receivables of 126 and 78 days, respectively. The inventory and receivables are expected to be at similar levels over the medium term, resulting in a similar GCA of 200-220 days over the medium term. |
Liquidity: Adequate Bank limit utilisation is low at around 36 percent for the past twelve months ended January 2025. Cash accruals are expected to be over Rs 45-55 crore which are sufficient against term debt obligation of Rs 1 crore over the medium term. In addition, it will act as cushion to the liquidity of the company.
Current ratio is healthy at 3.5 times on March 31, 2025. Liquid investments of around Rs.21 crore in shares, debentures, and mutual funds as on March 31, 2025. 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: Stable Crisil Ratings believes VTM will benefit from its established market position in the grey fabric segment and shall maintain its healthy financial risk profile over the medium term, backed by low debt and steady accrual |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company Set up in 1951, VTM manufactures cotton fabric at its factory in Sulakkarai, Tamil Nadu. In FY24, company started home textiles division, where company manufactures and sells bedsheets, pillow covers, quilts, etc through and american E-commerce platform “Quince”. The company is promoted by Mr T Kannan. The company is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). |
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 - 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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