Sharmanji Yarns Pvt. Ltd.

Brickwork Ratings assigns the long-term ratings of BWR A+/Stable and short-term ratings of BWR A1 for the Bank Loan Facilities of Rs. 376.08 Crs. of Sharmanji Yarns Pvt. Ltd.

Particulars

Facilities	Amount(Rs.Crs.)	Tenure	Rating	Regulator
Fund Based	354.08	Long Term	BWR A + /Stable Assignment	RBI
	22.00	Short Term	BWR A1 Assignment	RBI
	(50.00)
	(34.00)
	(14.00)
	(34.00)
	(56.00)
	(68.00)
Grand Total	376.08	(Rupees Three Hundred Seventy Six Crores and Eight lakhs Only)

Note:
1. Please refer to BWR website www.brickworkratings.com for the definition of the ratings
2. Refer to Annexures I, II, and III for details of rated bank loan facilities, debt instruments, and the List of Entities Consolidated
*** As per the latest information available, E-VFS facility of Rs.25cr from SBI is surrendered by the company thus not rated. RATING ACTION / OUTLOOK

Brickwork Ratings has assigned long-term ratings of ‘BWR A+/Stable’ and short-term ratings of 'BWR A1' for the bank loan facilities of Sharmanji Yarns Private Limited (SYPL).

The ratings assigned to the bank loan facilities of Sharmanji Yarns Pvt Ltd (SYPL) factor in the company’s strong business risk profile, supported by the extensive experience of its promoters in the yarn industry, an established dealer network, and longstanding relationships with its customers and suppliers. SYPL's moderately large scale of operations is additionally supported by the commercialisation of enhanced capacity to 2.19 lakh spindles (adding 47,424 spindles) from September 2024 onwards and the strategic location of its manufacturing unit in Ludhiana, Punjab.

The operating income of the company has increased by ~18% from Rs.980crore in fiscal 2024 to Rs.1,159crore in fiscal 2025 and further to Rs.1,205crore in fiscal 2026, driven by commencement of operations following the capital expenditure (capex) undertaken in September 2024, thereby leading to volume growth. The company has achieved operating income of Rs.335crore in the first three months of fiscal 2027 and is expected to attain Rs.1,325crore for the full fiscal, driven by volume growth. The operating margin increased from 6.64% in fiscal 2024 to 13.68% in fiscal 2025, driven by stabilisation of cotton prices and ramp-up of operations post capacity enhancement; however, the volatility in the margins is seen in FY26, with margin standing at around 9.96% largely due to volatility in raw cotton and polyester prices, which form ~70% of its cost of production. The operating margin is expected at 12-13% in fiscal 2027, supported by gradual recovery and expected stabilisation of cotton prices. 

The ratings also factor in SYPL’s healthy financial risk profile marked by low overall gearing and healthy debt coverage indicators, driven by strong net worth of Rs.664crore as on March 31, 2026, backed by steady accretion of reserves. 

The ratings, however, are partially offset on account of susceptibility of its moderate operating profitability to volatility in demand-supply dynamics of the industry, particularly evident from the performance during FY25 and FY26, and its presence in the fragmented cotton yarn industry. Also, the rating is constrained by the working capital-intensive operations of the company. 

KEY RATING DRIVERS

Credit Strengths:

• Experience of promoters in the textile industry :

  Established in 2002, the company is being promoted by Mr. Ashu Jain and his father, Mr. Jatinder Kumar Jain, who possess long-standing experience of more than 20 years in the yarn manufacturing industry. The promoters were engaged in the cotton yarn trading business for ~25 years before entering the yarn manufacturing business in 2008. This has enabled the promoters to establish relations in the industry, and a profound understanding of the business has enabled the promoters to mitigate the risks associated with volatility in cotton/yarn prices to an extent. The promoters have developed healthy relationships with the customers and suppliers over the years, which has secured repeat orders and partially mitigated the risk associated with fluctuating sales or unexpected revenue drops, and ensured consistency in the supply chain and cost savings through discounts. Moreover, the company has an established distributor network across north India, and it sells ~80% of its products to various knitting companies through these dealers.

• Healthy financial risk profile and debt coverage indicators :

  The company has a strong net worth base of Rs.664crore as on March 31, 2026 (provisional) as against Rs.617crore as on 31 March 2025, driven by healthy accretion to reserves. Due to a reduction in the total debt and the accretion of profits to the net worth, the company’s overall gearing and TOL/TNW ratios have also improved and stood comfortable at 0.48x as on 31 March 2026 (provisional) and are expected to be around 0.60x in the current fiscal year. Debt protection metrics are healthy, with an interest coverage ratio of 4.46x in FY26 and expected to be around 5.1-5.8x in the next two years. 

• Moderately large scale of operations, strategic locations and capacity enhancement :

  The company operates at a moderately large scale with an expanded capacity of 219,312 spindles in FY26 from 171,888 spindles. Additionally, the company benefits significantly from its location in the Ludhiana yarn cluster in Punjab, which provides easy access to raw cotton, proximity to suppliers, affordable skilled labor, and robust power and transport infrastructure. These advantages drive cost efficiencies and operational scale, helping revenue grow year over year to Rs.1205crore in FY26 (up from Rs.1159crore in FY25 and Rs.980crore in FY24) despite a softer overall demand environment. Further, the company maintains a moderately diversified product mix consisting of cotton, polyester-cotton (PC), and polyester yarns. Sales are primarily driven by domestic demand (approx 97-98%) from small and mid-sized enterprises, with PC yarn serving as the primary revenue driver (~73% of total revenue in FY26). Backed by the promoters' extensive industry experience, the company maintains a strong domestic presence with domestic sales constituting around 98% in FY26, and export opportunities are pursued by the company selectively based on profitability.

Credit Risks:

• Moderate operating profitability susceptible to volatility in supply-demand dynamics of the industry :

  The company operates in an inherently volatile industry where the supply and demand scenario depend on various factors such as favourable monsoons, yield, raw material prices, cyclicality, productivity, demand, and the government’s intervention in terms of fixing a minimum support price along with global market scenario. Polyester prices are also volatile in nature. Hence, profitability is adversely affected by movement in such trends. Further, the inherent cyclicality associated with the textile industry and volatile cotton and polyester prices have affected the profitability margins at the industry level in the past. In FY26, the high raw material volatility (such as cotton and input costs), rising labor and power expenses, and subdued global demand impacted the profitability of yarn spinners as the domestic market faced cost pressures and subdued demand.

• Highly competitive and fragmented industry :

  The yarn industry is a combination of organised and many unorganised (small and medium) companies, which leads to high competition. The commoditised cotton yarn also limits the pricing ability of the industry players to an extent. Due to the fragmented nature of the industry, there is limited ability with yarn spinners to pass on these adverse price fluctuations to customers. With high cotton prices prevailing in the market at present, the profitability margins of all yarn spinners are expected to moderate from the recent past levels.

• Working capital-intensive nature of operations :

  The company's operations are raw material (cotton and polyester fibre) intensive, with material costs constituting ~65-75% of total operating income (TOI). The company’s working capital requirements are high as cotton procurement happens primarily during December-March every year. Quality cotton is available in early winters, forcing yarn manufacturers to buy in large quantities and stock it for the remaining season. This results in an elongated working capital cycle as companies do not get long credit periods from their suppliers/cotton traders. Thus, SYPL's inventory holding period remains high for a period of 5-6 months and extends a credit period of 40-60 days to its customers. However, it receives negligible credit support from its suppliers. Thereby, SYPL’s working capital cycle is elongated. The working capital requirement of the company is almost funded by internal cash accruals and external debt. The company’s operating cycle stood at 124 days in FY26 and is expected to be in the range of 150-200 in the next two years.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone Audited Financial results for FY23, FY24, FY25, management-certified provisional for FY26, and projections for the next two years of Sharmanji Yarns Pvt Ltd, along with the information/clarification provided by the entity. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Upward factors

• Healthy growth in the scale of operations above Rs.1,500 crores along with sustained recovery in its operating profitability to above 15%, leading to an improvement in its return and debt protection metrics.
• Prudent working capital management, strengthening the financial risk profile and liquidity.

Downward factors 

• Any substantial dip in turnover below Rs.1,000 crores or fall in operating margin below 7%, leading to low net cash accrual.
• Any debt-funded capital expenditure leading to an increase in leverage ratios, particularly weakening of overall gearing ratio of more than 1x.

However, any major shifts in the industry average shall be a key monitorable. 

LIQUIDITY INDICATORS - Strong

The company has an adequate liquidity position, as marked by a healthy current ratio of 1.84x as on 31 March 2025, which has further improved to 1.97x as on 31 March 2026 (provisional). The company has generated healthy net cash accruals of Rs.115Crs in FY25 and is expected to have cash accruals in the range of 110-120crores against minimal yearly debt obligation of Rs.15-20Crs over the medium term. The company had prepaid its Term Loan of Rs.50.3crore from SBI in August 2025 and o/s TL of Rs.42.81 crore from PNB in August 2026. Bank limit was moderately utilised at 75% on average for the 12 months ended July 31, 2026. The operating cycle of the company has shortened to 124days in FY26 (provisional) as against 137days in FY25. The company has to maintain high inventory due to the nature of the business, leading to high inventory days of around 103 days in FY25, which has improved to 86 days in FY26 (provisional). The cash balances stood at Rs.0.83Crs as on 31 March 2026 (provisional).

ABOUT THE ENTITY

Incorporated in 2002, Sharmanji Yarns Pvt Ltd (SYPL) is engaged in the manufacturing of different types of yarn such as cotton yarn, polyester-cotton yarn, and polyester spun yarn, with an installed capacity of 2.19 lakh spindles. SYPL’s manufacturing facility is in Ludhiana, Punjab. The company is being promoted by the Jain family, which includes Mr Jatinder Kumar Jain, Mr Ashu Jain (Managing Director), and other family members. The company sells its products in the domestic as well as global markets.

ESG Profile

The company demonstrates a Adequate ESG profile based on its environmental, social, and governance practices.

Environmental: The company focuses on green energy by building an 11 MW solar power unit to reduce dependence on conventional power, lower greenhouse gas emissions and support a reduction in operating costs. The company conducts all its operations, ensuring the compliance with statutory and industrial requirements for environmental protection and conservation of natural resources to the extent possible. 

Social: The company maintains a large local workforce of around 1500 peopls and strictly adheres to labour laws, workplace safety protocols, accident prevention frameworks, and training initiatives, offering insights into operational resilience.

Governance: The company focuses on board independence, financial transparency, audit mechanisms, and risk-management practices.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 23 - 24 (Audited)	FY 24 - 25 (Audited)	FY 25 - 26 (Provisional)
Operating Revenue	Rs.Crs.	980.11	1159.27	1205.11
EBITDA	Rs.Crs.	65.07	158.61	120.58
PAT	Rs.Crs.	23.80	71.39	47.60
Tangible Net Worth	Rs.Crs.	544.87	616.50	664.10
Total Debt / Tangible Net Worth	Times	0.64	0.70	0.48
Current Ratio	Times	1.72	1.84	1.97

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction of the rated facilities include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2026)			2025		2024		2023
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	354.08	BWR A+/Stable (Assignment)	NA	NA	NA	NA	11Aug2023	BWR A- Stable (Reaffirmation with Change in Outlook and Simultaneous Withdrawal)
Fund Based	ST	22.00	BWR A1 (Assignment)	NA	NA	NA	NA	11Aug2023	BWR A2+ (Reaffirmation with Change in Outlook and Simultaneous Withdrawal)
FB SubLimit	ST	(50.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
		(34.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
		(14.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
		(34.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
		(56.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
		(68.00)	BWR A1 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		376.08	(Rupees Three Hundred Seventy Six Crores and Eight lakhs Only)

*** As per the latest information available, E-VFS facility of Rs.25cr from SBI is surrendered by the company thus not rated. Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Short Term Debt
• Manufacturing Company

Analytical Contacts
Akanksha Maindiratta Senior Rating Analyst akanksha.m@brickworkratings.com	Ravi Rashmi Dhar Director - Ratings ravi.d@brickworkratings.com
Client Support | clientsupport@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Axis Bank Ltd.	Cash Credit - Sanctioned	56.00	_	56.00	Simple##
	Sub-Limit (EPC/PCFC) - Sanctioned		(34.00)
	Sub-Limit (FBP/FBD/EBRD/PSCFC) - Sanctioned		(34.00)
	Sub-Limit (Letter of Credit) - Sanctioned		(14.00)
	Sub-Limit (WCDL) - Sanctioned		(56.00)
2	HDFC Bank	Term Loan - Out-standing	76.08	_	76.08	Simple##
3	Punjab National Bank	Cash Credit - Sanctioned	68.00	_	68.00	Simple##
	Sub-Limit (WCDL) - Sanctioned		(68.00)
4	Punjab National Bank	PC/PCFC - Sanctioned	_	22.00	22.00	Simple##
5	State Bank Of India (SBI)	Cash Credit - Sanctioned	104.00	_	104.00	Simple##
6	Yes Bank	Cash Credit - Sanctioned	50.00	_	50.00	Simple##
	Sub-Limit (WCDL) - Sanctioned		(50.00)
Total			354.08	22.00	376.08
TOTAL (Rupees Three Hundred Seventy Six Crores and Eight lakhs Only)

* As per the latest information available, E-VFS facility of Rs.25cr from SBI is surrendered by the company thus not rated.

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf.

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