| Sky Industries Limited | ||||||
| Ratings upgraded to 'CRISIL BBB-/Stable/CRISIL A3' | ||||||
| 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 upgraded its ratings on the bank loan facilities of Sky Industries Limited (SIL) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BB+/Stable/CRISIL A4+’.
The upgrade reflects the improved business risk profile of SIL, driven by sustained growth in revenue. Revenue increased to Rs 81.66 crore in fiscal 2024 from Rs 74.92 crore in fiscal 2023 and is expected to increase to Rs 90-100 crore in fiscal 2025, backed by increased demand from its customers. Operating profitability has also improved to 9.06% in fiscal 2024 from 7.1% in fiscal 2023, with increase in capacity utilisation and revenue. Financial profile remains above- average and liquidity adequate with adequate cash accrual against repayment, moderate bank limit utilisation and cash and bank balances including mutual funds.
The ratings reflect the company’s established market position in the hook and loop industry, and healthy financial risk profile. These strengths are partially offset by the company’s small scale of operations in a highly fragmented industry and fluctuating profitability. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of SIL with its subsidiary Skytech Textiles Pvt Ltd. Together these are referred to as Sky Group.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position in hook and loop industry: SIL’s market position is backed by a strong track record of more than 25 years and more than 800 active customers and direct sales to 90% of the clients. Key customers have been associated with the company for 10-15 years, ensuring stable orders. As SIL supplies to a wide range of industries, including footwear, automotive and aviation, dependence on a single sector is low. The promoters' experience of around three decades, understanding of local market dynamics and established relationships with suppliers and customers should continue to support the business risk profile.
Healthy financial profile: SIL’s capital structure is comfortable because of low reliance on external funds yielding gearing of 0.31 time and low TOLANW ratio of 0.56 time as on March 31, 2024. The debt protection metrics have been healthy because of low leverage and healthy profitability, as reflected in interest coverage and net cash accrual to total debt (NCATD) ratios of 5.88 times and 0.42 time, respectively, for fiscal 2024. Despite debt-funded capex, the financial profile is expected to be comfortable over the medium term.
Weaknesses: Modest scale of operations: During the five fiscals through March 31, 2024, revenue have increased from Rs 52 crore to Rs 82 crore, yet remain modest. Scale up in operations is constrained by intense competition from a large unorganised sector, leading to smaller market size for manufacturers of premium, high-quality fasteners and moderate export revenue. The overall scale of operations is expected to remain moderate given the industry dynamics.
Low and fluctuating profitability: Operating profitability has been fluctuating between 7.1% to 13% over the three fiscals through 2024, primarily on account of fluctuations in raw material prices. While SIL has moderate ability to pass on these input price hikes to clients, operating margin is expected to remain susceptible to any large and sudden movements in input prices. |
Liquidity: Adequate Bank limit utilisation was moderate at 62% on average for the 12 months ended June 30, 2024. Cash accrual is expected to be Rs 5.5-7.7 crore which will be sufficient against term debt obligation of Rs 0.9-2.14 crore over the medium term. The current ratio was ~2.15 times as on March 31, 2024. The company has moderate cash and bank balance including fixed deposits (FDs) and liquid investments of Rs 13.61 crore as on March 31, 2024, out of which the company has unencumbered FDs and liquid investments of around Rs 11 crore. |
Outlook: Stable CRISIL Ratings believes SIL's business risk profile will continue to benefit from the extensive experience of its promoters and established relationships with customers. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1989, SIL promoted by Shah family and manufactures hook and loop tape fasteners and other value-added products, including velvet tape and webbings. The company sells its products under various brands, prominent among them being Sky-Magic, Sky-Walker, Sky-Magna and Sky-Wonder. It also deals in fibre glass insect screens and other products. The manufacturing facilities are in Navi Mumbai and Bhiwandi, Maharashtra. The company is listed on the Bombay Stock Exchange (BSE) and managed by professionals.
Skytech Textiles Private Limited: It is a subsidiary Incorporated on June 12,2023 and is engaged mainly in the business of Technical Textile and allied products namely Neoprene. |
Key financial indicators (Consolidated)
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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 – 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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