Aruppukottai Sri Jayavilas Pvt. Ltd. (erstwhile Aruppukottai Sri Jayavilas limited)

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 42.97 Crs. of Aruppukottai Sri Jayavilas Pvt. Ltd. (erstwhile Aruppukottai Sri Jayavilas limited)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (14 Dec 2020)	Present
Fund Based	44.65	35.97	Long Term	BWR D Downgrade	BWR B /Stable Upgrade
Non Fund Based	14.00	7.00	Short Term	BWR D Downgrade	BWR A4 Upgrade
Grand Total	58.65	42.97	(Rupees Forty Two Crores and Ninety Seven lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

The ratings for bank loan facilities of Aruppukottai Sri Jayavilas Pvt. Ltd. ("ASJPL" or "the company" factors regular servicing of interest and debt obligations for the past three months (Curing period as per extant guidelines) and the confirmation received from lenders relating scheduled repayments of all the term loans. The ratings also factors the established operational track record and experienced promoters, reputed clientele and long standing relationship and the average financial risk profile. BWR also notes that company has reportedly improved its internal controls to ensure timely repayment of its debt obligations and also focused on better working capital utilization. However, these strengths are partially offset by exposure to intense competition, susceptibility of profitability to volatility in raw material prices, impact of COVID 19 in the business operations.

The impact of Covid-19 on business operations and financial risk profile has resulted in subdued FY21 (Prov) and the steady recovery thereafter. BWR notes the company had availed relief under the Covid-19 moratorium package during Mar'20 - Aug'20 for term loans' interest payment and principal repayment. Further the company has not availed for one time restructuring (OTR) of loans under RBI Resolution Framework for Covid-19 related Stress.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. Brickwork Ratings believes that ASJPL's business and financial risk profile will be maintained over the medium term. The outlook may be revised to positive if there is sustained improvement in the scale of operations and higher than envisaged improvement in profitability that result in an improved financial risk profile, and liquidity position. The outlook may be revised to negative if there is lower than expected revenue or profitability and deterioration of gearing and debt coverage metrics, any adverse impact of COVID-19 due to new variant on the business profile resulting in a weaker liquidity position of the company

KEY RATING DRIVERS

Credit Strengths:

Extensive Experience of Promoters :
The Company and the promoters have a long track record of more than four decades and extensive experience in the textile industry, which has helped in establishing relationships with suppliers and customers and obtaining repeat orders.
Average financial risk profile: :
The Company’s financial risk profile is considered average despite the decline in revenue in FY21, reflected by modest scale of operations, low profitability margins, average net worth and adequate debt protection metrics. The revenue declined to Rs. 134.16 crs in FY21 from Rs 177.81 in FY20. The PAT improved to Rs.1.55 crs in FY21 from Rs. 0.90 Cr in FY20. The EBITDA was at Rs.10.98 Cr in FY21. Tangible Net worth was Rs. 23.98 crs (PY Rs.22.43 Crs) as on 31 Mar 2021. Gearing remains average at 2.60 times as on 31 Mar 2021. Debt protection metrics were adequate with DSCR at 1.04 times (PY 0.79 times) as on 31 Mar 2021 and ISCR at 1.50 times (PY 1.46 times) as on 31 Mar 2021. The company has achieved a revenue of Rs. 101 crs as on 30 Sep 2021 on a provisional basis.
Strong relationship with customers and wide distribution network :
The promoter group, with their extensive experience of more than four decades, has established a strong relationship with the suppliers and customers over the period. The products are supplied to various textile manufacturers in India and demand for domestic yarn has increased on account of import restriction of yarn from China.

Credit Risks:

Susceptibility of profitability to volatile cotton and cotton yarn prices and working capital intensity of operations :
Similar to other spinning companies, ASJPL profitability remains exposed to volatility in cotton prices. The commoditised nature of its products and intense competition constrains it from fully passing on any increase in raw material prices toits end customers, which may adversely impact its profitability. Cotton is stocked during the harvest season from October to March and the companies will incur carrying costs for the inventory stocked, which are expected to keep their liquidity profiles stretched, particularly for companies with sizeable stocks. This leads to large working capital requirements
Impact Of Covid 19 :
The company had to temporarily suspend its manufacturing and other operations for two months (from last week of March 2020 till third week of May 2020) due to government directive on covid 19 pandemic. The company has obtained Moratorium and COVID term loans from the bankers to mitigate the working capital shortfall. The operations were further disrupted during second wave of COVID pandemic in May 2021, however, the business operations have revived from and the company has earned a revenue of Rs. 101 Cr till Sep 2021. The operations remain susceptible to any further disruptions from Covid-19 and its subsequent waves impacting not only the demand but also the supply chain.
Intense competition :
The cotton yarn industry is highly commoditized. The high degree of fragmentation and commoditized nature has caused intense competition among cotton processing units. Entry barriers in cotton processing business are low on account of limited capital and technology requirements and low differentiation in end product. This leads to intense competition and limits players’ pricing power, resulting in low profitability. Since raw cotton is an agricultural commodity, its availability is limited and primarily depends on the monsoon.

ANALYTICAL APPROACH - Standalone

BWR has adopted standalone approach in assessing the ratings as the company has no subsidiary.

RATING SENSITIVITIES

Ability of the company to improve its scale of operations as well as its profitability margins, reduce its gearing levels, improve the liquidity, to infuse promoter funds, manage its receivables position and service its debt obligations timely is a key rating sensitivity.

Positive

Healthy growth in revenues and profitability with low debt obligations.
Improved geographical diversification of clientele

Negative :

Subdued demand resulting in lower than expected accruals, stretch in working capital cycle caused by large, debt-funded capital expenditure, leading to deterioration of credit profile and and impacting liquidity position
Timely servicing of the debt obligations
Specific credit metrics that may result in a downward rating action include (1) Decline in profitability margins i.e., Operating margin below 5% and net margin below 1 %, 2) deterioration in debt protection metrics - ISCR and DSCR below one time on a sustained basis.

LIQUIDITY INDICATORS - Stretched

The liquidity position of the company has improved from poor to stretched on regular repayment of scheduled term loans for the past three months. However, the utilisation of working capital limits remains more than 95% for the last six months. The EBITDA of Rs. 10.98 Crs in FY21 is sufficient to cover the interest and finance charges of Rs. 8.12 Crs in FY21. The long term debt obligations of the company have increased on availment of COVID loan and machinery loans from Sundaram finance limited. The debt obligation of Rs. 9.84 Crs pertaining to FY22 are expected to be repaid from internal cash accruals and infusion of funds by the promoters. Current ratio remains subdued at 1.15 times in FY21 and Cash and cash equivalents are at Rs. 3.75 Crs as on 31 March 2021. The ability of the company to infuse promoter funds, manage its receivables position and service its debt obligations timely is a key rating sensitivity.

ABOUT THE ENTITY

Aruppukottai Sri Jayavilas Private limited (ASJPL) erstwhile Aruppukottai Sri Jayavilas Limited was incorporated in 1951, in Aruppukottai , TamilNadu. ASJPL manufactures cotton and polyester-blended cotton yarn used for knitting and weaving. The installed capacity of spinning division is 70,080 spindles. The company is also engaged in operating bus service for local routes and the Company has one Indian Oil Retail Outlet at Madurai .
ASJVL owns three windmills located near kudamkulam with combined capacity of 850 KW.

Mr. TRS Kathikeyan, Mr TRS Subbaraj Babu and Ms Karthikeyan Vishnupriya are the directors to this company

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	134.16	177.81
EBITDA	Rs.Crs.	10.98	10.81
PAT	Rs.Crs.	1.55	0.92
Tangible Net Worth	Rs.Crs.	23.98	22.43
Total Debt/Tangible Net Worth	Times	2.60	2.12
Current Ratio	Times	1.15	0.99

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	35.97	BWR B/Stable (Upgrade)	14Dec2020	BWR D (Downgrade)	26Apr2019	BWR B+/STABLE (Upgrade)	27Feb2018	BWR B/STABLE (Assignment)
Fund Based	ST	NA	NA	NA	NA	NA	NA	27Feb2018	BWR A4 (Assignment)
Non Fund Based	ST	7.00	BWR A4 (Upgrade)	14Dec2020	BWR D (Downgrade)	26Apr2019	BWR A4 (Reaffirmation)	27Feb2018	BWR A4 (Assignment)
Grand Total		42.97	(Rupees Forty Two Crores and Ninety Seven lakhs Only)

Rating Advisory, as on 06May2020
Press Release, as on 06May2020
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Kaushik Srikanth V Rating Analyst kaushik.s@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Aruppukottai Sri Jayavilas Pvt. Ltd. (erstwhile Aruppukottai Sri Jayavilas limited)

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Indian Bank	Working Capital Term Loan - Sanctioned	1.60	_	1.60
2	Indian Bank	Cash Credit - Sanctioned	10.80	_	10.80
3	Indian Bank	Letter of Credit - Sanctioned	_	7.00	7.00
4	Indian Bank	Covid -19 Emergency Line Credit - Sanctioned	0.92	_	0.92
5	Indian Bank	Funded Interest Term Loan - Sanctioned	_	_	0.00
6	Indian Bank	GECL - Sanctioned	2.55	_	2.55
7	State Bank Of India (SBI)	GECL - Sanctioned	3.63	_	3.63
8	State Bank Of India (SBI)	Funded Interest Term Loan - Sanctioned	_	_	0.00
9	State Bank Of India (SBI)	Covid -19 Emergency Line Credit - Sanctioned	0.42	_	0.42
10	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	_	0.00
11	State Bank Of India (SBI)	Cash Credit - Sanctioned	10.90	_	10.90
12	State Bank Of India (SBI)	Term Loan - Sanctioned	1.38	_	1.38
13	State Bank Of India (SBI)	Term Loan - Sanctioned	0.68	_	0.68
14	State Bank Of India (SBI)	Term Loan - Sanctioned	1.84	_	1.84
15	State Bank Of India (SBI)	Working Capital Term Loan - Sanctioned	0.21	_	0.21
16	State Bank Of India (SBI)	Working Capital Term Loan - Sanctioned	1.04	_	1.04
Total			35.97	7.00	42.97
TOTAL (Rupees Forty Two Crores and Ninety Seven lakhs Only)

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