💰 Financial Performance

Revenue Growth by Segment

The company reported a TTM sales growth of -13%, a significant decline compared to the 5-year CAGR of 40% and 10-year CAGR of 20%. Quarterly sales for March 2024 stood at INR 166.40 Cr, down 20.3% from INR 208.88 Cr in September 2023.

Geographic Revenue Split

Not disclosed in available documents, though the company caters to both domestic and international markets from its manufacturing base in Erode, Tamil Nadu.

Profitability Margins

Operating Profit Margin (OPM) has seen a sharp decline from 12.68% in September 2022 to 4.01% in March 2024. Net profit growth for the TTM period is -81%, reflecting severe margin compression due to higher interest and operational costs.

EBITDA Margin

Operating profit for the quarter ended March 2024 was INR 6.68 Cr (4.01% margin), representing a 43% decrease from INR 11.74 Cr (12.68% margin) in September 2022.

Capital Expenditure

The company undertook a significant debt-funded acquisition of a spinning unit, which led to borrowings increasing from INR 40 Cr in March 2020 to INR 157 Cr by March 2023. This capex is intended to scale up manufacturing capacity for cotton yarn.

Credit Rating & Borrowing

CARE Ratings reaffirmed the long-term rating at 'CARE BBB' but revised the outlook to 'Negative' from 'Stable' on March 12, 2025. Short-term ratings were downgraded from 'CARE A3+' to 'CARE A3'. The revision is due to moderated interest coverage and debt protection metrics following the debt-funded capex.

⚙️ Operational Drivers

Raw Materials

Cotton is the primary raw material, accounting for the majority of the cost of goods sold. Price fluctuations in domestic and imported cotton significantly impact the cost structure.

Import Sources

Not disclosed in available documents; however, the company utilizes both domestic and imported cotton.

Capacity Expansion

The company recently acquired a new spinning unit to expand its production of cotton yarn. While the unit has been acquired, it is yet to fully scale up operations as of March 2025.

Raw Material Costs

Raw material costs are highly sensitive to monsoon patterns as cotton cultivation in India is largely rain-fed. Violent changes in the cost structure of cotton directly affect the company's profitability margins.

Manufacturing Efficiency

The company is focused on consolidation strategies to improve productivity. Capacity utilization for the newly acquired spinning unit is a key monitorable for future efficiency.

📈 Strategic Growth

Expected Growth Rate

Not disclosed

Growth Strategy

Growth is pursued through the acquisition of additional spinning capacity and vertical integration into knitted fabrics and garments. The company aims to achieve growth by scaling the newly acquired unit and implementing cost-optimization strategies to recover margins.

Products & Services

Cotton yarn, knitted fabrics, and readymade garments.

Brand Portfolio

Salona

Market Expansion

The company is exploring new international and domestic markets to diversify its client base and mitigate the impact of localized economic slowdowns.

🌍 External Factors

Industry Trends

The textile industry is undergoing consolidation. Future growth is expected to be driven by capacity additions and efficiency improvements, though current liquidity is tight across the sector.

Competitive Landscape

The industry is characterized by high competition from both domestic players in Tamil Nadu and international manufacturers.

Competitive Moat

The company's moat is built on the vast experience of its promoters in the textile industry and its established 'Salona' brand name in the yarn and fabric market.

Macro Economic Sensitivity

Highly sensitive to the textile industry cycle and global economic conditions, which affect international trade and garment demand.

Consumer Behavior

Shifts in global fashion trends and demand for knitted garments affect the order book for the company's fabric and garment divisions.

Geopolitical Risks

International trade barriers and global economic impact from prolonged lockdowns or geopolitical tensions affect the export-oriented garment business.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to textile manufacturing standards and pollution norms in Tamil Nadu. The company must also comply with SEBI Listing Obligations and Disclosure Requirements (LODR).

Taxation Policy Impact

The company provides for current and deferred income tax; in FY20, it earned a post-tax profit of INR 117.35 Lakhs.

Legal Contingencies

There were no instances of non-compliance, penalties, or strictures imposed by Stock Exchanges or SEBI during the last three years (as of the 2020 report).

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the ability to scale up the new spinning unit as envisaged. Failure to do so while loan repayments have commenced poses a liquidity risk.

Geographic Concentration Risk

Manufacturing is concentrated in Erode and Sathyamangalam, Tamil Nadu, making it sensitive to local power and labor regulations.

Third Party Dependencies

High dependency on cotton farmers and traders; supply is vulnerable to monsoon vagaries.

Technology Obsolescence Risk

The company is implementing consolidation and productivity improvements to mitigate the risk of falling behind more technologically advanced competitors.

Credit & Counterparty Risk

The company faces an elongated collection period, which increases credit risk and impacts the liquidity available for debt servicing.