Rating Advisory

September 30, 2020 | Mumbai Adarsh BirmechaOriginal Template1 23

Sri Lakshmi Saraswathi Textiles (Arni) Limited

Advisory as on September 30, 2020

This rating advisory is provided in relation to the rating of Sri Lakshmi Saraswathi Textiles (Arni)
Limited

The key rating sensitivity factors for the rating include:

 Revenue and profitability

 Outcome of fluctuations in raw material prices
 Working capital management
 Capital expenditure plans and their funding

CRISIL Ratings has a policy of keeping its accepted ratings under constant and ongoing
monitoring and review. Accordingly, it seeks regular updates from companies on business and
financial performance. CRISIL is yet to receive adequate information from Sri Lakshmi Saraswathi
Textiles (Arni) Limited (SLST) to enable it to undertake a rating review. CRISIL is taking all
possible efforts to get the rated entity to cooperate with its rating process for enabling it to carry
out the rating review.

CRISIL views information availability risk as a key factor in its assessment of credit risk. (Please
refer to CRISIL Ratings publication dated April 30, 2012 - 'Information Availability - a key risk
factor in credit ratings')

If SLST continues to delay the provisioning of information required by CRISIL to undertake a

rating review then, in accordance with circulars SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dt.Nov
1, 2016, SEBI/HO/MIRSD/ MIRSD4/CIR/P/2017/71dt.June 30,2017 and
SEBI/HO/MIRSD/CRADT/CIR/P/2020/2 dt January 3, 2020 issued by Securities and Exchange
Board of India, CRISIL will carry out the review based on best available information and issue a
press release.

About the Company

SLST was incorporated in 1964 by the late Mr B Rajagopal Naidu and his son, the late Mr R Srihari.
Operations are currently managed by Mr Balakrishna S (managing director) and Mr R Padmanaban
(joint managing director). The company has a spinning unit in Arni, Tiruvannamalai (Tamil Nadu). It is
listed on the Bombay Stock Exchange.

Please note: This advisory should not be construed as a rating reaffirmation.

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information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at
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 Rating Rationale
July 12, 2019 | Mumbai

Sri Lakshmi Saraswathi Textiles (Arni) Limited

Ratings Reaffirmed

Rating Action
Total Bank Loan Facilities Rated Rs.29.5 Crore
Long Term Rating CRISIL B-/Stable (Reaffirmed)
Short Term Rating CRISIL A4 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has reaffirmed its ratings on the bank facilities of Sri Lakshmi Saraswathi Textiles (Arni) Limited (SLST) at
'CRISIL B-/Stable/CRISIL A4'.

The ratings also reflect below-average financial risk profile and susceptibility to fluctuations in raw material prices.
These weaknesses are partially offset by extensive experience of the promoters in the cotton yarn industry.

Key Rating Drivers & Detailed Description

Weakness:
* Below-average financial risk profile: Debt protection metrics have been weak owing to operating losses.

* Susceptibility to fluctuations in raw material prices: Cotton and cotton yarn prices, have been highly volatile in
the past, and are expected to remain so over the medium term. Such high fluctuation in raw material prices and low
pricing power are likely to keep profitability constrained.

Strengths:
* Promoters' extensive experience: Benefits derived from the promoters' experience of over four decades and
relations with suppliers and customers should continue to support the business.
Liquidity
The company's liquidity is weak, reflected by continued losses and low current ratio of less than 1 time as on 31
March, 2019. As a result, bank lines remain unutilised and the company is managing with support from creditors to
meet its working capital requirements. Further, the promoters are likely to provide need-based funding support to
meet incremental working capital requirement.

Outlook: Stable
CRISIL believes SLST will continue to benefit from the experience of promoters and an established track record. The
outlook may be revised to 'Positive' if substantial increase in revenue, profitability, and cash accrual strengthens
financial risk profile. Conversely, the outlook may be revised to 'Negative' if low cash accrual or large, debt-funded
capital expenditure weakens financial risk profile and liquidity.

About the Company

SLST was incorporated in 1964 by the late Mr B Rajagopal Naidu and his son, the late Mr R Srihari. The company
has a spinning unit in Arni, Thiruvanamalai (Tamil Nadu). The operations are managed by Mr Balakrishna S
(Managing Director), and Mr R Padmanaban (Joint Managing Director).

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Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 120.94 98.59
Profit after tax (PAT) Rs crore -7.11 -3.56
PAT margin % -5.89 -3.6
Adjusted debt/adjusted networth Times 5.9 0.59
Interest coverage Times -2.68 -3.87

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.

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Annexure - Details of Instrument(s)
Coupon Rating
Date of Maturity Issue Size
ISIN Name of Instrument Rate Assigned with
Allotment Date (Rs Cr)
(%) Outlook
NA Bill Discounting NA NA NA 3.5 CRISIL A4
NA Cash Credit NA NA NA 5 CRISIL B-/Stable

NA Letter of Credit NA NA NA 2 CRISIL A4

NA Packing Credit NA NA NA 2 CRISIL A4

NA Proposed Long Term Bank Loan Facility NA NA NA 17 CRISIL B-/Stable

Annexure - Rating History for last 3 Years

Start of
Current 2019 (History) 2018 2017 2016
2016

Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount

CRISIL CRISIL CRISIL CRISIL

CRISIL
B- B- B- B+/Stabl
Fund-based Bank LT/S B/Stable/
27.50 /Stable/ 17-09-18 /Stable/ 21-11-17 /Stable/ 12-08-16 e/
Facilities T CRISIL
CRISIL CRISIL CRISIL CRISIL
A4
A4 A4 A4 A4

Non Fund-based LT/S CRISIL CRISIL CRISIL CRISIL CRISIL

2.00 17-09-18 21-11-17 12-08-16
Bank Facilities T A4 A4 A4 A4 A4
All amounts are in Rs.Cr.

Annexure - Details of various bank facilities

Current facilities Previous facilities
Amount Amount
Facility Rating Facility Rating
(Rs.Crore) (Rs.Crore)
Bill Discounting 3.5 CRISIL A4 Bill Discounting 3.5 CRISIL A4
CRISIL B- CRISIL B-
Cash Credit 5 Cash Credit 5
/Stable /Stable
Letter of Credit 2 CRISIL A4 Letter of Credit 2 CRISIL A4
Packing Credit 2 CRISIL A4 Packing Credit 2 CRISIL A4
Proposed Long Term CRISIL B- Proposed Long Term CRISIL B-
17 17
Bank Loan Facility /Stable Bank Loan Facility /Stable
Total 29.5 -- Total 29.5 --

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Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Cotton Textile Industry
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term
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services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this
Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into
consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment
advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or
otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision
within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any
securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as
of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its
opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors
and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional
advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the
accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the
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the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities

5
or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other
applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available
for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and
undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business
units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have
information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public
information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing
conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument
of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL