| Cheviot Co Ltd | ||||||
| Ratings reaffirmed at 'Crisil A+/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil A+/Stable/Crisil A1+’ ratings on the bank facilities of Cheviot Co Ltd (CCL).
The ratings continue to reflect the healthy market position of CCL in the jute industry and its strong financial risk profile. These strengths are partially offset by exposure to risks posed by change in regulations and easy access to cheaper substitutes. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of CCL. |
Key Rating Drivers & Detailed Description Strengths: Healthy market position in the jute industry, supported by a diversified product portfolio: The business risk profile is supported by a diversified product profile, wide geographic reach, healthy operating efficiency and extensive experience of the promoters in the jute industry. The vast product portfolio and geographic reach mitigate the risk of any product becoming obsolete or a slowdown in a particular economy. Besides processing jute, the company produces high-yielding, value-added products such as yarn, hessian, and superior hessian cloth. The yarn and superior hessian are widely used in international markets and generate a higher margin. CCL has also commissioned its new weaving unit in fiscal 2023.
However, as market sentiment and export demand remain muted amidst global challenges, capacity utilisation of the new unit has been lower than expected. For the first nine months of fiscal 2025, revenue was around Rs 305 crore (as against Rs 339 crore reported in the first nine months of fiscal 2024) while the operating margin stood at 10.64%. Gradual revival in demand, both in domestic and export markets, and ramp up in capacity utilisation should strengthen the market position and contain the impact of rise in employee cost with effect from February 2024 over the medium term.
Strong financial risk profile: Networth of Rs 518 crore as on March 31, 2024, is supported by steady revenue and healthy profitability, coupled with controlled dividend payout. Gearing and total outside liabilities to total networth ratios were also low at 0.02 time and 0.11 time, respectively, as on the same date. Low external debt has also led to strong debt protection metrics. Regular capital expenditure (capex) towards technology upgradation and replacement of old machinery is generally met via internal accrual. In the absence of any large, debt-funded capex, the financial risk profile should sustain at similar levels over the medium term.
Weakness: Exposure to risks posed by change in regulations and easy access to cheaper substitutes: The domestic jute industry is highly regulated, especially in key areas such as pricing and sales. The Cabinet Committee on Economic Affairs fixes the minimum support price (MSP) for raw jute, to prop up jute prices and ensure security for farmers. Variation in MSP on raw jute from state to state and jute varieties, affects the end-price of products. Also, under the aegis of the Jute Packaging Material (compulsory use in packaging commodities) Act (JPMA), 1987, the government has made it mandatory to use jute bags for packaging of sugar and food grains for consignments varying from 26-100 kg. This regulation has been a key growth driver for the industry. The Act, however, exempts consumer packs of 25 kg and below, and packaging of food grains and sugar for export. Also, conditions of the Act are diluted as substitutes such as plastic bags are available at 30-50% lower rates. Besides, the government occasionally permits reuse of jute sacks for storage of food grains, affecting sales. Additionally, the government is the largest consumer of jute sacks in the domestic market, accounting for nearly 60% of demand. |
Liquidity: Strong Bank limit utilisation was negligible, averaging around 22.12% for the 12 months ending November 30, 2024. Expected cash accrual of Rs 30-35 crore will aid liquidity in the absence of any term debt obligation over the medium term. Unencumbered investments in debt and equity marketable instruments and cash balance are estimated to be around Rs 280 crore on December 31, 2024. CCL declared a final dividend of Rs 5 (50%) per share on 60,16,875 ordinary shares of face value of Rs 10 each, amounting to Rs 3.01 crore for the year ended March 31, 2024. The company also bought back 1,75,000 fully paid-up ordinary shares of Rs 10 each for Rs 1,800 per share, amounting to capital outlay of Rs 31.5 crore in fiscal 2025. However, no significant dilution of liquidity is likely over the medium term. The current ratio was healthy at 5.15 times as on March 31, 2024. |
Outlook: Stable Crisil Ratings believes CCL will continue to benefit from the extensive experience of its promoters in the jute industry and its diversified product profile and wide distribution network and is likely to maintain a strong financial risk profile. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1897, CCL is the flagship company of the Cheviot group, which has interests in jute, tea, and leather businesses. The company got its current name in 1976, when Mr BD Kanoria took over the operations. Currently, his son, Mr HV Kanoria is the chairman and managing director.
CCL manufactures and exports high-value, non-traditional, diversified jute yarn and fabric, such as precision fine jute yarn, sacking cloth, hessian cloth and bags, sacking bags (for packing food grain and other allied purposes), 4–36-pound jute yarn and superior hessian cloth. It has two manufacturing units in West Bengal: at Budge-Budge and Falta Special Economic Zone (an export-oriented unit). The company generates around 40% of its revenue from exports. It also has a captive power plant with an installed capacity of 3.14 megawatts; however, power is sourced from CESC Ltd and the captive plant is kept as a stand-by arrangement. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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