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

Brickwork Ratings upgrades the long-term rating and reaffirms the short-term ratings for the Bank Loan Facilities of Rs. 92.59 Crs. of Aruppukottai Sri Jayavilas Pvt. Ltd. (erstwhile Aruppukottai Sri Jayavilas limited)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (07 Dec 2021)	Present
Fund Based	35.97	81.59	Long Term	BWR B /Stable Upgrade	BWR BB - /Stable Upgrade
Non Fund Based	7.00	11.00	Short Term	BWR A4 Upgrade	BWR A4 Reaffirmation
Grand Total	42.97	92.59	(Rupees Ninety Two Crores and Fifty Nine 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 upgradation of ratings of bank loan facilities of Aruppukottai Sri Jayavilas Pvt. Ltd ("ASJPL" or "the company") factors in the improvement in the company's business risk profile marked by top-line growth sustained margins and improvement the debt protections metrics and overall credit risk profile. The company's FY22 performance has improved on the back of good demand post two years of subdued business profile due to the Covid-19 related disruptions. The company has achieved a total operating income of Rs.220.16 Crs in FY22, on a provisional basis. The company's profitability and debt protection metrics have improved as on 31 Mar 2022 (P). The ratings continue to draw strength from the established operational track record and experienced promoters, reputed clientele and long standing relationship and the average financial risk profile. However, these strengths are partially offset by exposure to intense competition, concentration risks and susceptibility of profitability to volatility in raw material prices.

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 as reflected by the improved scale of operations, adequate gearing, and stretched liquidity. The firm achieved a turnover of Rs. 220.16 Crs in FY22(P) as against Rs.134.16 Crs in FY21. The EBITDA improved to Rs. 17.70 Crs in FY22(P) as against Rs.10.98 Crs in FY21. The PAT improved to Rs.9.71 Crs in FY22(P) from Rs. 1.55 Cr in FY21. The gearing is adequate at 2.84 times as of 31 Mar 2022(P) as against 2.60 times as of 31 March 2021. Tangible Net worth was Rs. 33.69 Crs (PY Rs.23.98 Crs) as of 31 Mar 2022(P). Debt protection metrics were adequate with DSCR at 1.21 times (PY 1.04 times) as of 31 Mar 2022(P)  and ISCR at 2.49  times (PY 1.50 times) as of 31 Mar 2022(P). On a provisional basis, the company has achieved ~Rs. 45 crs year to date.

• 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

• 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.

• Concentration Risk :

  The company has established a relationship with several suppliers, however, BWR notes the supplier concentration risk arising from company's reliance on a single vendor (~51.44% total requirements in FY22 (P) (PY ~37%). Furthermore, the operations are exposed to geographic concentration as four out of the top five customers are from Maharashtra. 

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). BWR has adopted a stand-alone approach as the company does not have any subsidiaries.

RATING SENSITIVITIES

Ability of the company to improve its scale of operations while maintaining its profitability margins, reduce its gearing levels, improve the liquidity and manage its receivables position is a key rating sensitivity.

Upward

• Increase in operating income and profitability on a sustained basis.
• Improved geographical diversification of clientele.

Downward

• Subdued demand resulting in lower than expected accruals and resulting in delays servicing of the debt obligations
• Stretch in working capital cycle leading to deterioration in the liquidity position.
• Specific credit metrics that may result in a downward rating action include (1) Deterioration in Total Debt/ TNW to more than 3 times. 2) deterioration in debt protection metrics - ISCR and DSCR below 1.75 times and 1 time respectively on a sustained basis.

LIQUIDITY INDICATORS - Stretched

The liquidity position of the company continues to be stretched as reflected by the high working capital utilisation of ~90-95% for the last 6 months and subdued current ratio of 1.02 times as on 31 Mar 2022 (P) (PY- 1.15 times). The Cash and cash equivalents (excluding term deposits of Rs.5.69 crs) stood at Rs.3.27 crs as on 31 March 2022(P). The EBITDA of Rs. 17.70 Crs in FY22 (P) is sufficient to cover the interest and finance charges of Rs. 7.11 Crs in FY22 (P). The company's net cash accruals of Rs. 13.48 Crs was adequate for the debt obligations of Rs.9.84 Crs pertaining to FY 22. The projected net cash accrual of  Rs.13.96 Crs and Rs. 15.17 Crs is considered adequate for the debt obligation Rs.10.69 Crs and Rs. 8.29 Crs pertaining to FY23 and FY24. The company's ability to achieve the envisaged net cash accrual shall be a key rating monitorable considering the increased debt obligations in FY23. 

ABOUT THE ENTITY

Aruppukottai Sri Jaya Vilas Private limited (ASJPL) erstwhile Aruppukottai Sri Jayavilas Limited (The Company)was incorporated in 1951, in Aruppukottai, Tamil Nadu. ASJPL manufactures cotton and polyester-blended cotton yarn used for knitting and weaving. The products are made from various imported and Indian cotton. ASJPL is equipped to offer a wide range of - GRS/ BCI/ OEKO-TEX/ OCS/ GOTS - certified quality yarn products conforming to ISO 9001-2015 QMS and 5 S – to offer spun yarn in 100% Cotton/Blends of Polyester, Carded/Combed, Compact/Normal, Single/Ply Twisted, Fancy Slub/High twist, Weaving/Knitting, Cones/Hanks.

The company is also engaged in operating bus services for local routes (~1 % of revenue share in FY22 (P)) and the Company has one Indian Oil Retail Outlet at Madurai (~12 % of revenue share in FY22 (P)).

Mr. TRS Kathikeyan, Mr. TRS Subbaraj Babu, and Ms. Karthikeyan Vishnupriya are the directors of 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/TNW	Times	2.60	2.12
Current Ratio	Times	1.15	0.99

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

CRISIL had continued the ratings in the Issuer Not Cooperating Category* vide its press release dated March 25, 2022 due to unavailability of information for surveillance of ratings.

*Issuer did not cooperate; based on best available information.

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	81.59	BWR BB-/Stable (Upgrade)	07Dec2021	BWR B Stable (Upgrade)	14Dec2020	BWR D (Downgrade)	19Apr2019	BWR B+ Stable (Upgrade)
Non Fund Based	ST	11.00	BWR A4 (Reaffirmation)	07Dec2021	BWR A4 (Upgrade)	14Dec2020	BWR D (Downgrade)	19Apr2019	BWR A4 (Reaffirmation)
Grand Total		92.59	(Rupees Ninety Two Crores and Fifty Nine lakhs Only)

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

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

Analytical Contacts
Jithin K. Ratings Analyst jithin.k@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	ICICI Bank	Term Loan - Out-standing	0.37	_	0.37
2	Indian Bank	Working Capital Term Loan - Out-standing	0.92	_	0.92
3	Indian Bank	Cash Credit - Sanctioned	10.80	_	10.80
4	Indian Bank	Term Loan - Sanctioned	16.20	_	16.20
5	Indian Bank	Letter of Credit - Sanctioned	_	7.00	7.00
6	Indian Bank	Covid -19 Emergency Line Credit - Out-standing	0.51	_	0.51
7	Indian Bank	GECL - Out-standing	1.50	_	1.50
8	Indian Bank	GECL - Out-standing	2.02	_	2.02
9	State Bank Of India (SBI)	GECL - Out-standing	2.75	_	2.75
10	State Bank Of India (SBI)	GECL - Out-standing	1.99	_	1.99
11	State Bank Of India (SBI)	Covid -19 Emergency Line Credit - Out-standing	_	_	0.00
12	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	4.00	4.00
13	State Bank Of India (SBI)	Cash Credit - Sanctioned	10.90	_	10.90
14	State Bank Of India (SBI)	Working Capital Term Loan - Out-standing	_	_	0.00
15	State Bank Of India (SBI)	Working Capital Term Loan - Out-standing	0.62	_	0.62
16	State Bank Of India (SBI)	Term Loan - Out-standing	0.82	_	0.82
17	State Bank Of India (SBI)	Term Loan - Out-standing	0.37	_	0.37
18	State Bank Of India (SBI)	Term Loan - Out-standing	_	_	0.00
19	State Bank Of India (SBI)	Term Loan - Sanctioned	16.20	_	16.20
20	Sundaram Finance Limited	GECL - Out-standing	0.20	_	0.20
21	Sundaram Finance Limited	GECL - Out-standing	0.29	_	0.29
22	Sundaram Finance Limited	HP Loan - Out-standing	0.03	_	0.03
23	Sundaram Finance Limited	HP Loan - Out-standing	0.02	_	0.02
24	Sundaram Finance Limited	HP Loan - Out-standing	1.32	_	1.32
25	Sundaram Finance Limited	HP Loan - Out-standing	1.47	_	1.47
26	Sundaram Finance Limited	HP Loan - Out-standing	0.08	_	0.08
27	Sundaram Finance Limited	HP Loan - Out-standing	0.08	_	0.08
28	Sundaram Finance Limited	HP Loan - Out-standing	0.08	_	0.08
29	Sundaram Finance Limited	HP Loan - Out-standing	0.27	_	0.27
30	Sundaram Finance Limited	HP Loan - Out-standing	0.03	_	0.03
31	Sundaram Finance Limited	HP Loan - Out-standing	0.05	_	0.05
32	Sundaram Finance Limited	HP Loan - Out-standing	1.75	_	1.75
33	Sundaram Finance Limited	HP Loan - Out-standing	3.39	_	3.39
34	Sundaram Finance Limited	HP Loan - Out-standing	0.08	_	0.08
35	Sundaram Finance Limited	HP Loan - Out-standing	0.06	_	0.06
36	Sundaram Finance Limited	HP Loan - Out-standing	0.44	_	0.44
37	Sundaram Home Finance Limited	Mortgage Loan - Out-standing	5.98	_	5.98
Total			81.59	11.00	92.59
TOTAL (Rupees Ninety Two Crores and Fifty Nine lakhs Only)