| Samosaran Syntex Private Limited | ||||
| Rating migrated to 'CRISIL BB+/Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| *Issuer did not cooperate; based on best-available information |
| Detailed Rationale |
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Due to inadequate information, CRISIL, in line with Securities and Exchange Board of India guidelines, had migrated its rating on the long-term bank facilities Samosaran Syntex Private Limited (SSPL; part of the Samosaran group) to 'CRISIL BB+/Stable/CRISIL A3+; issuer not cooperating'. The company has subsequently provided the necessary information and CRISIL has migrated the rating to 'CRISIL BB+/Stable/CRISIL A3' from 'CRISIL BB+/Stable/CRISIL A3+; issuer not cooperating'. |
| Analytical Approach |
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For arriving at its ratings, CRISIL has combined the business and financial risk profiles of SSPL and Samosaran Yarns Pvt Ltd (SSPL; rated 'CRISIL BBB-/Stable/CRSIL A3'). That's because the two companies, together referred to as the Samosaran group, have common promoters and significant business synergies. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Established market position in the synthetic yarn industry: The group has been in the yarn trading market since 1948. Over the years, the promoter family has run operations through several business entities: KP Enterprises, MP Syntex, JD Syntex, RJ Syntex, SYPL, and SSPL. The present promoters, Mr Jindas Jain and his brothers, have established a strong relationship with key suppliers and customers. They also extend technical assistance to suppliers. The extensive promoter experience, healthy customer base, and increasing manufacturing turnover will support the business risk profile over the medium term. * Above-average financial risk profile: Total outside liabilities to total networth ratio was moderate at about 1.76 times and the networth moderate at about Rs 59.78 crore, as on March 31, 2019. The net cash accrual to adjusted debt ratio was about 0.23 time and the interest coverage ratio about 2.84 times, in fiscal 2019. The debt protection metrics are likely to remain at similar levels over the medium term. With no debt funded capex planned and with moderate profitability and accretion to reserves, financial risk profile is expected to improve over medium term. Weakness * Working capital intensive nature of operations: Gross current assets were high at 147 days, driven by receivables of 65 days and inventory at 58 days, as on March 31, 2019. Operations are likely to remain working capital intensive owing to continuation of high debtor period and inventory holding. * Limited pricing flexibility because of the commodity-like nature of the products and intense competition: There are a large number of players in the yarn industry, leading to a high level of fragmentation and increased pricing competition. The absence of any product differentiation restricts the pricing power of individual players. Given the fragmented nature of the industry, the bargaining power of yarn processors with polyester filament yarn producers is low. Although the operating margin is expected to improve over the medium term because of an increase in manufacturing turnover, profitability is likely to remain vulnerable because of limited pricing power. * Modest scale of operations in SSPL: Despite being in operations for more than 30 years, scale of operations were modest as SSPL at Rs 72 crore for fiscal 2019. The scale of operations are modest due to low focus of management in trading business as margins are relatively low and also due to intense competition. Liquidity: Adequate The group has adequate liquidity as reflected in expected cash accruals of Rs 24-27 crore per fiscal over the medium term against term debt obligation of Rs 6 crore. Expected capex of Rs 7-8 crore in fiscal 2020 is likely to be adequately funded through internal accrual. The group's working capital limit of Rs 50 crore were utilised at an average of 94% over the 12 months through May 2019, which are expected to be enhanced to Rs 66 crore in fiscal 2020 and will be sufficient to fund incremental working capital requirement. However management is focusing more on the manufacturing entity (SYPL) and resultantly working capital limits in SSPL will continue to be at Rs 10 crore. Current ratio is estimated at 1.46 times as on March 31, 2019. Unencumbered cash and bank balance is estimated to be moderate Rs 2 crore as on March 31, 2019. Further, there has been timely infusion of promoter's funds in form of unsecured loans which stood at Rs 28.6 crore as on March 31, 2019. |
| Outlook: Stable |
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CRISIL believes the Samosaran group will continue to benefit from its established track record in the yarn industry. |
| About the Group |
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The Samosaran group was established in 1948 by the Mumbai-based Jain family; overall operations are currently managed by Mr Jindas Jain and his brother, Mr Mahendra Jain. Set up in June 2007, SSPL trades in yarn. SYPL, which was set up in 2006, manufactures and trades in synthetic yarn. SYPL has plants in Bhiwandi, Maharashtra, and Silvassa, Union Territory of Dadra and Nagar Haveli. |
| Key Financial Indicators - Samosaran group | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
| Annexure - Details of Instrument(s) | ||||||||||||||||||||||||||||||
Annexure - List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| *Issuer did not cooperate; based on best-available information | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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