Arnaa Texfab Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 31.81 Crs. of Arnaa Texfab Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	31.81	Long Term	BWR BB /Stable Assignment
Grand Total	31.81	(Rupees Thirty One Crores and Eighty One 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

Brickwork Ratings assigns the ratings of 'BWR BB/Stable' for the Bank Loan Facilities of Rs. 31.81 Crs. of Arnaa Texfab Pvt. Ltd.

Arnaa Texfab Pvt. Ltd.'s rating is positively and significantly influenced by the powerful Group Credibility Leverage it gains from its association with the esteemed Deesan Group. This essential linkage allows the company to successfully bypass the substantial initial hurdles common for new entrants in the highly capital-intensive textile sector. The immediate market credibility and operational validation inherited from Deesan's decades of successful industry experience are crucial assets. This advantage enables the company to skip the lengthy process of establishing independent trust, allowing it to quickly secure relationships with large, financially stable customers immediately upon its anticipated start in April 2025. Furthermore, the company benefits from accessing the parent group's comprehensive vertical integration, advanced technological base, and rigorously disciplined manufacturing processes. This access guarantees a highly reliable supply chain and consistent technical expertise, which in turn assures clients of superior product quality and timely delivery, both critical elements for success in the competitive grey fabric market.

The ratings face constraints primarily due to the severe raw material cost vulnerability inherent in Arnaa Texfab Pvt. Ltd.'s operations. As the cost of yarn constitutes the largest production expense for a grey fabric manufacturer, its significant price volatility directly impacts financial stability. Given the highly competitive commodity market, the company has minimal ability to swiftly increase selling prices, meaning sudden increases in yarn costs immediately cause severe margin compression. This necessity to hold substantial raw material inventory also exposes the company to inventory valuation losses during price declines, complicating financial forecasting and potentially straining liquidity. This volatility is compounded by an intense working capital strain, which is a systemic weakness in the grey fabric sector. The long cash cycle is driven by the strategic need to hold large yarn inventories to manage supply and price risks, thus locking up significant funds in inventory and receivables. Efficient management of the cash conversion cycle is crucial. Furthermore, the company faces considerable Policy and Tariff Exposure. Domestic policy changes affecting yarn inputs, such as duties or taxes, can sharply increase costs, while international risks like high US tariffs on Indian finished goods can severely reduce demand from the company's downstream customers, leading to volume contraction and challenging the efficient management of the company's significant working capital needs.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes 'Arnaa Texfab Pvt. Ltd. ' business risk profile will be maintained over the medium term. The outlook may be revised to Positive if a sustained increase in the scale of operations and higher than envisaged profitability result in an improved financial risk profile and better gearing and debt protection metrics. The outlook may be revised to Negative if lower than expected revenue or profitability, a stretch in the working capital cycle, unanticipated capex, or weakening gearing impact the financial risk profile.

 

KEY RATING DRIVERS

Credit Strengths:

• Group Credibility Leverage :

  Arnaa Texfab Pvt. Ltd. gains a significant advantage from its relationship with the Deesan Group, helping it overcome the usual difficulties new companies face in the capital-intensive textile industry. This connection immediately provides market credibility and operational validation, a crucial asset developed over Deesan's decades of experience. Consequently, Arnaa can avoid the lengthy process of building trust, allowing it to quickly establish ties with major, financially sound customers right from its start in April 2025. Moreover, by accessing the parent group's established vertical integration, advanced technology, and disciplined manufacturing systems, Arnaa ensures a reliable supply chain and technical expertise, guaranteeing clients high quality and prompt delivery, which are essential factors in the competitive greige fabric market.

Credit Risks:

• Raw Material Cost Vulnerability :

  The volatility in yarn prices presents a major financial constraint for Arnaa Texfab Pvt. Ltd., directly impacting the company's stability. As a manufacturer of greige fabric, yarn cost is the largest single component of production expense. Given the highly competitive nature of the commodity fabric market, the company has limited power to raise its selling prices quickly. Consequently, unexpected or sharp increases in yarn costs, driven by factors like cotton harvest fluctuations or crude oil prices, create a severe and immediate margin compression. Furthermore, the business necessity to hold significant raw material inventory exposes the company to risks of inventory valuation losses during price drops. This chronic volatility makes predictable financial forecasting difficult and strains the company's liquidity, potentially increasing its reliance on short-term borrowing to navigate cash flow gaps.

• Working Capital Strain :

  The working capital intensity of the grey fabric sector presents a clear operational weakness for Arnaa Texfab Pvt. Ltd. The company's production model necessitates an elongated cash cycle, driven primarily by the requirement to strategically hold large volumes of yarn inventory, which is the main raw material. This stocking is essential for hedging against supply disruptions and price volatility, but it simultaneously locks up a significant portion of the company's funds. The duration for which capital remains locked in inventory and receivables creates a heavy and sustained demand on the company's finances. To manage this exposure, Arnaa Texfab's strategy must emphasize minimizing the cash conversion cycle. This requires rigorous optimization of how quickly inventory moves and diligent negotiation of payment terms with both its yarn suppliers and its fabric customers to prevent cash flow blockages and ensure smooth production continuity.

• Policy and Tariff Exposure :

  The textile sector's reliance on stable trade and regulatory environments means Arnaa Texfab Pvt. Ltd. is highly exposed to external risks that may severely impact its operations. Domestically, policy decisions affecting yarn inputs (such as anti-dumping duties or tax structure anomalies) may directly increase its raw material costs, leading to a sharp compression of the narrow profit margins in the commodity greige fabric segment. Internationally, the imposition of high US tariffs on Indian finished textiles may lead to significantly reduced orders for Arnaa's downstream customers, including processors and garmenters. This trade shock may translate directly into delayed payments and volume contraction in the domestic supply chain, challenging the efficient management of the company's large working capital requirements.

ANALYTICAL APPROACH - Standalone

To arrive at its ratings, BWR has considered a standalone approach. Reference may be made to the Rating Criteria hyperlinked below.

RATING SENSITIVITIES

Going forward, the company's ability to expand its operational scale, boost profitability, enhance liquidity and credit profile, and effectively manage the working capital will be critical factors influencing its ratings.

Positive factors:-

• Achieving a total operating income of Rs 155.00 Crs or above.
• Improving the EBITDA margin to 6% or above and the PAT margin to 4% or above.
• Sustained improvement in the working capital cycle.

Negative factors:-

• Achieving a total operating income of Rs 80.00 Crs or below.
• Further elongation in the working capital cycle
• Further deterioration of the gearing ratio to 5.00x or above.

LIQUIDITY INDICATORS - Adequate

The company’s adequate liquidity is characterised by its projected cash flows and conservative debt coverage despite being in the nascent stage of commercial operations, which commenced in April 2025. Financial projections indicate robust debt servicing capacity, with expected cash accruals of Rs 4.34 Crores in FY26 comfortably covering the debt obligations of Rs 0.31 Crores. This comfortable coverage is sustained into FY27, where projected accruals of Rs 4.61Crores exceed obligations of Rs 1.41 Crores. Reflecting its early stage of growth, the cash balance is anticipated to improve from Rs 0.43 Crores in FY25 to Rs 1.25 Crores in FY26. Furthermore, the liquidity position is strengthened by low current leverage; the company maintains a safety net through unutilized working capital limits (average utilization near 22%), with the current ratio expected to improve modestly from 1.28x in FY25 to 1.33x in FY26.

ABOUT THE ENTITY

Arnaa Texfab Private Limited is a textile manufacturer that commenced production of grey fabric for the domestic market on April 1, 2025. The company is a key entity within the Deesan Group, a diversified conglomerate with three decades of experience in the textile industry and various other sectors. The Deesan Group is recognized as the second-largest producer of grey fabric in India, operating across the complete "farm-to-fashion" value chain. Arnaa Texfab, incorporated on May 25, 2021, is strategically located within the Textile Park developed by Deesan Infrastructure Private Limited in Dahiwad, Shirpur, District-Dhule, Maharashtra.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 22 - 23 (Audited)	FY 23 - 24 (Audited)	FY 24 - 25 (Provisional)
Operating Revenue	Rs.Crs.	Not Available	Not Available	Not Available
EBITDA	Rs.Crs.	Not Available	Not Available	-0.11
PAT	Rs.Crs.	Not Available	Not Available	-0.11
Tangible Net Worth	Rs.Crs.	0.01	0.01	4.86
Total Debt / Tangible Net Worth	Times	59.00	190.00	2.87
Current Ratio	Times	0.75	0.86	1.28

KEY COVENANTS OF THE FACILITY RATED

The key covenants are the standard terms as stipulated in the sanction letters of the rated facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

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

Facilities	Current Rating  (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	31.81	BWR BB/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		31.81	(Rupees Thirty One Crores and Eighty One lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Manufacturing Company

Analytical Contacts
Varsha Jasmin Rating Analyst varsha.j@brickworkratings.com	Nagaraj K Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com	Customer Support | CustSupport@brickwrokratings.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	Bank of Maharashtra	Term Loan - Out-standing	13.81	_	13.81	Simple##
2	Bank of Maharashtra	Cash Credit - Sanctioned	18.00	_	18.00	Simple##
Total			31.81	0.00	31.81
TOTAL (Rupees Thirty One Crores and Eighty One lakhs Only)

## 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.