By Gokulakrishnan Madhusuthanan

This announcement rectifies the version published on 10 June 2021 to correctly state the figures in the financial summary section. The amended version is as follows:

India Rating and Research (Ind-Ra) has upgraded S.A.Aanandan Spinning Mills Private Limited’s (SASMPL) Long-Term Issuer Rating to ‘IND BB’ from ‘IND BB- ‘. The Outlook is Stable. The instrument-wise rating actions are as follows:

 

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Term loan

-

-

March 2026

INR66

IND BB/Stable

Upgraded

Fund-based facilities

-

-

-

INR500

IND BB/Stable /IND A4+

Long-term upgraded;  short-term affirmed

Non-fund-based facilities

 

 

 

INR55

IND A4+

Affirmed

 

The upgrade reflects SASMPL’s stronger-than-expected performance in FY21.

KEY RATING DRIVERS

Despite the impact of COVID-19-led disruptions, SASMPL's revenue rose to INR1,376 million in FY21 (FY20: INR1,356 million), against Ind-Ra’s expectations of a decline in the same, due to an increase in the number of orders received by the company and an increase in realisations. The scale of the operation continued to be medium. The figures for FY21 are provisional in nature. Ind-Ra expects  the revenue to grow slightly in the near-to-medium term due to a likely increase in demand for the finer yarn counts.

 

Also, while SASMPL’s EBITDA margin declined to a modest 6.7% in FY21 (FY20: 7.3%), the fall was not as sharp as that expected by Ind-Ra (5.9%). The EBITDA margin fell because of an increase in raw material prices. The return on capital employed was 10% in FY21 (FY20: 9%). Ind-Ra expects the EBITDA margin to dip slightly in FY22 due to a continued increase in raw material prices.

 

With respect to the credit metrics, the interest coverage (operating EBITDA/gross interest expense) improved to 1.9x in FY21 (FY20: 1.5x), against Ind-Ra’s expectation of a deterioration in the same to 1.06x, due to a fall in the interest expenses to INR49 million (INR69 million). The net leverage (adjusted net debt/operating EBITDAR) deteriorated to only 5.7x in FY21 (FY20: 5.4x) against the agency’s expectation of 9.4x. The leverage weakened owing to a decline  in the absolute EBITDA to INR93 million  (INR100 million).   Ind-Ra expects the credit metrics to improve marginally in FY22 due to the likely reduction of the debt through the scheduled repayments. 

 

Liquidity Indicator – Stretched: Ind-Ra expects SASMPL’s liquidity position to improve in FY22 due to a likely continued improvement in the net working capital cycle and an increase in the absolute EBITDA. SAMPL’s average utilisation of the fund-based limits was 83% during the 12 months ended March 2021. The cash flow from operations decreased to INR8.5 million in FY21 (FY20: INR58.2 million) due to an unfavourable change in the net working capital. The net cash cycle remained elongated but improved to 128 days in FY21 (FY20: 136 days) owing to a decrease in the inventory period to 127 days (143 days). The company had a cash balance of INR4 million at FYE21 (FYE20: INR8 million). SASMPL has repayment obligations of INR29.6 million each for FY22 and FY23, which will be met through net cash accruals. The company had availed the Reserve Bank of India-prescribed debt moratorium for April–September 2020; it has repaid the entire moratorium outstanding.

 

The ratings, however, continue to be supported by the promoters’ two-decade-long experience in the cotton yarn manufacturing business

 


RATING SENSITIVITIES

Negative: A decline in the scale of operations and EBITDA margin, leading to deterioration in the credit metrics on sustained basis, and/or weakening of the liquidity profile, will be negative for the ratings. 

Positive: An improvement in the scale of operations or EBITDA margin, leading to an improvement in the credit metrics, with the interest coverage exceeding 2.0x on sustained basis, will be positive for the ratings.


COMPANY PROFILE

Incorporated in 1996, SASMPL manufactures cotton yarn in the count range of 20s-80s. It has an annual installed capacity of 21,250 spindles.

 

FINANCIAL SUMMARY

Particulars

FY21 (Provisional)

FY20

Revenue (INR million)

1,376

1,356

EBITDA (INR million)

93

100

EBITDA margin (%)

6.7

7.3

Interest coverage (x)

1.9

1.5

Net leverage (x)

5.7

5.4

Source: SASMPL, Ind-Ra


RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

4 September 2020

12 June 2020

7 May 2019

8 January 2019

Issuer rating

Long-term

-

IND BB/Stable

IND BB-/Stable

IND BB(ISSUER NOT COOPERATING)

IND BB/Stable

IND BB(ISSUER NOT COOPERATING)

Long-term loans

Long-term

INR66.0

IND BB/Stable

IND BB-/Stable

IND BB(ISSUER NOT COOPERATING)

IND BB/Stable

IND BB(ISSUER NOT COOPERATING)

Fund-based facilities

Long-/short-term

INR500.0

IND BB/Stable/IND A4+

IND BB-/Stable/IND A4+

IND BB(ISSUER NOT COOPERATING)/IND A4+(ISSUER NOT COOPERATING)

IND BB/Stable/IND A4+

IND BB(ISSUER NOT COOPERATING)/IND A4+(ISSUER NOT COOPERATING)

Non-fund-based facilities

Short-term

INR55.0

IND A4+

IND A4+

IND A4+(ISSUER NOT COOPERATING)

IND A4+

IND A4+(ISSUER NOT COOPERATING)


COMPLEXITY LEVEL OF INSTRUMENTS

Instrument Type

Complexity Indicator

Term loan

Low

Fund-based working capital limits

Low

Non-fund-based limits

Low

 

For details on the complexity level of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.

 

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

DISCLAIMER

ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDIARATINGS.CO.IN/RATING-DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.

Applicable Criteria

Analyst Names

  • Primary Analyst

    Gokulakrishnan Madhusuthanan

    Analyst
    India Ratings and Research Pvt Ltd Harmony Square 3rd Floor, Door No. 48 & 50 Prakasam Street T Nagar Chennai 600 017
    044 43401700

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121