9/3/24, 2:58 PM Rating Rationale

Rating Rationale
February 28, 2023 | Mumbai

Amber Spintex Private Limited

'CRISIL BBB-/Stable/CRISIL A3' assigned to Bank Debt

Rating Action
Total Bank Loan Facilities Rated Rs.72 Crore
Long Term Rating CRISIL BBB-/Stable (Assigned)
Short Term Rating CRISIL A3 (Assigned)
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 assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of Amber Spintex Private
Limited (ASPL).

The ratings reflect the extensive experience of the promoters in the textile industry, and efficient working capital
management. These strengths are partially offset by susceptibility to volatility in cotton prices and regulatory changes and
exposure to intense competition.
Key Rating Drivers & Detailed Description
Strengths:
Extensive experience of the promoters: The promoters have experience of more than 10 years in the textile industry.
This has given them an understanding of market dynamics and enabled established relationships with suppliers and
customers. Backed by their expertise, the company’s expected revenue in fiscal 2023 is about Rs 250 Cr.

Efficient working capital management: The working capital cycle is managed efficiently, as reflected in gross current
assets (GCAs) of 67-124 days over the three fiscals through 2022. GCAs stood at 67 days as on March 31, 2022, driven
by inventory of 50-70 days and receivables of 2-8 days. Further, the working capital cycle is partly supported by payables
of 15-20 days.

Weaknesses:
Susceptibility to volatility in cotton prices and regulatory changes: As cotton is an agricultural commodity, its
availability depends on rainfall. Government interventions and fluctuations in global cotton output have resulted in sharp
volatility in cotton prices. Abrupt change in regulations can distort market prices and affect the profitability of players in
the cotton value chain, including ginners. Because of large fluctuation in prices, the operating margin of ASPL ranged
between 6.75% and 12.67% in the three fiscals through 2022. The operating margin is expected at 11.5-12.5% in fiscal
2023 and will remain a key monitorable.

Exposure to intense competition: The company faces competition from several unorganised players with small
capacities as entry barriers to the industry are low owing to limited capital and technology requirement and little
differentiation in end products. Intense competition will continue to exert pricing pressure over the medium term.
Liquidity: Adequate
Bank limit utilisation was moderate at 50% on average for the 12 months through January 2023. Cash accrual, expected
over Rs 22 crore per annum, will sufficiently cover yearly term debt obligation of Rs 13.9 crore over the medium term, and
the surplus will cushion the liquidity.

Current ratio was healthy at 1.44 times as on March 31, 2022. The promoters will likely extend support by way of equity and
unsecured loans to meet working capital requirement and debt obligation.
Outlook: Stable
CRISIL Ratings believes ASPL will continue to benefit from the extensive experience of its promoters and established
relationships with clients.
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Rating Sensitivity factors

Upward factors
Significant increase in revenue and operating margin leading to higher net cash accrual
Better financial risk profile, with gearing below 1.5 times over the medium term

Downward factors
Decline in operating margin and revenue leading to net cash accrual below Rs 15 crore
Large, debt-funded capital expenditure weakening the capital structure
Substantial increase in working capital requirement weakening the liquidity and financial risk profile
About the Company
Incorporated in 2004, ASPL manufactures cotton yarn (mainly 30s count) used for knitting and weaving. The company
commenced operations in October 2015. Its manufacturing facility is in Dabhoi district, Gujarat, and has installed capacity of
11,200 MTPA and 46,000 spindles.

The company is owned and managed by Mr Nagarjun Chauhan, Mr Laxman Maldebhai Jadeja and their family members.
Key Financial Indicators
As on / for the period ended March 31 2022 2021
Operating income Rs crore 347.94 200.53
Reported profit after tax (PAT) Rs crore 2.25 2.73
PAT margin % 0.65 1.36
Adjusted debt / adjusted networth Times 2.18 2.94
Interest coverage Times 2.85 2.12

Status of non cooperation with previous CRA:

ASPL has not cooperated with India Ratings And Research Pvt Ltd, which has classified the company as non-cooperative
through release dated September 19, 2022. The reason provided by India Ratings And Research Pvt Ltd is non-furnishing of
information for monitoring the ratings.
Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where
applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on
available information. The complexity level for instruments may be updated, where required, in the rating rationale
published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the
Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

Name of Date of Coupon Maturity Issue size Complexity Rating assigned
ISIN
instrument allotment rate (%) date (Rs crore) level with outlook
NA Cash Credit NA NA NA 25 NA CRISIL BBB-/Stable
NA Term Loan NA NA May-27 41.75 NA CRISIL BBB-/Stable
NA Bank Guarantee NA NA NA 5.25 NA CRISIL A3

Annexure - Rating History for last 3 Years

Start of
Current 2023 (History) 2022 2021 2020
2020
Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount
Fund Based CRISIL
Facilities LT 66.75 BBB-/Stable -- -- -- -- --

Non-Fund Based
Facilities ST 5.25 CRISIL A3 -- -- -- -- --

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5.25 Bank of Baroda CRISIL A3
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Cash Credit 25 Bank of Baroda CRISIL BBB-/Stable

Term Loan 41.75 Bank of Baroda CRISIL BBB-/Stable

This Annexure has been updated on 28-Feb-23 in line with the lender-wise facility details as on 27-Feb-23 received from the rated entity.

Criteria Details

Links to related criteria

Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Bank Loan Ratings
CRISILs Approach to Financial Ratios
Rating Criteria for Cotton Textile Industry

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