| Valson Industries Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its 'CRISIL BBB-/Stable/CRISIL A3' ratings on the bank facilities of Valson Industries Limited (VIL). |
| Key Rating Drivers & Detailed Description |
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Strengths: * Extensive experience of the promoters in the textile industry The promoters' experience of 3 decades, strong understanding of local market dynamics, and healthy relationships with customers and suppliers should continue to support the business. * Healthy financial risk profile VIL has a comfortable capital structure, with adjusted networth and total outside liabilities to adjusted networth ratio estimated at Rs 32 crore and 0.69 time, respectively, as on March 31, 2020. Debt protection metrics are healthy, as reflected in estimated interest coverage and net cash accrual to adjusted debt ratio of 4.60 times and 0.36 time, respectively, in fiscal 2020. The financial risk profile should remain healthy over the medium term, backed by steady accretion to reserve. While decline in revenue and profitability will weaken the debt protection metrics in fiscal 2021, these are likely to improve over the medium term. Weaknesses: * Average profitability amid intense competition VIL's profitability has been modest at 5.35%-6.9% over the 3 fiscals through 2020. There is limited differentiation between the products of different players because of the commoditised nature of the products, and intense competition constrains pricing power and profitability. Return on capital employed is estimated around 4.5% in fiscal 2020. * Modest scale of operations Although VIL has established itself as a reliable supplier, capacity utilisation at 90-100% constrains scalability. Thus, VIL's scale will remain modest because of the absence of major capacity expansion plans, which may restrict the bargaining power of the company with its counterparties. |
| Liquidity Adequate |
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Net cash accrual expected at Rs 1.40 crore in fiscals 2021 would be adequate to meet, term debt obligation of Rs 1.14 crore. The fund-based limit of Rs 6.75 crore was utilised at 75% on average during the 12 months through March 2020. The promoters and directors have infused funds in the form of unsecured deposits, which were outstanding at Rs 1.38 crore as on March 31, 2019, and estimated around Rs 2 crore as on March 31, 2020. The unutilised bank limit of Rs 2.05 crore and unencumbered cash and bank balance of Rs 0.04 crore as on March 31, 2020, should be sufficient to cover fixed cost during the pandemic-led lockdown. |
| Outlook: Stable |
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CRISIL believes VIL will continue to benefit from the extensive experience of its promoters and strong market position. |
| Rating Sensitivity factors |
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Upward factors * Sustained increase in revenue with stable operating margin, leading to higher cash accrual over Rs 8 crores * Prudent working capital management, strengthening the financial risk profile Downward factors * Sustained decline in revenue below 20% crore or decline in profitability, leading to lower cash accrual. * Stretch in the working capital cycle, or large, debt-funded capex, weakening the financial risk profile. |
| About the Company |
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VIL, the flagship company of the Mutreja group, was incorporated as Valson Synthetics Pvt Ltd in 1983. This Mumbai-based company was promoted by the late Mr Nanakchand D Mutreja, and got its current name in 1998. VIL has been listed on the Bombay Stock Exchange since 1994. The company undertakes texturising, twisting, and dyeing of polyester yarn, which is sold under the brand Valson. VIL also dyes cotton and fancy yarn on job work basis. Manufacturing units are at Silvassa in Dadra and Nagar Haveli and at Vapi in Gujarat. VIL is currently managed by the chairman and managing director, Mr Suresh N Mutreja, who is supported by his sons, Mr Kunal Mutreja and Mr Varun Mutreja. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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) | |||||||||||||||||||||||||||||||||||
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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| For further information contact: | ||||||
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