September 29, 2023

Shri Ramalinga Mills Private Limited: Ratings reaffirmed and removed from Issuer Non
Cooperating category
Summary of rating action

Previous Rated Amount Current Rated Amount

Instrument* Rating Action
(Rs. crore) (Rs. crore)
[ICRA]D; reaffirmed and removed
Long Term Fund-based -Term
26.37 26.37 from ‘Issuer Not Cooperating’
Loans
Category
[ICRA]D; reaffirmed and removed
Long Term -Fund-based - Working
85.00 85.00 from ‘Issuer Not Cooperating’
Capital Facilities
Category
[ICRA]D; reaffirmed and removed
Long Term - Unallocated Limits 66.67 66.67 from ‘Issuer Not Cooperating’
Category
[ICRA]D; reaffirmed and removed
Short Term - Non-fund Based-
2.50 2.50 from ‘Issuer Not Cooperating’
Working Capital Facilities
Category
Total 180.54 180.54
*Instrument details are provided in Annexure-I

Rationale

The ratings reaffirmation of Shri Ramalinga Mills Private Limited (SRML) factors in non-payment of dues post invocation of
corporate guarantee provided by SRML to its subsidiary company ‘Tamilnadu Jai Bharath Mills Limited’. The ratings also
consider disqualification of directors under the NCLT order issued in June 2022 and concerns pertaining to succession planning
within the promoter’s family. SRML’s performance witnessed moderations in FY2023 on the back of adverse demand
conditions in textile industry. Further, the operating margins witnessed sharp moderations during FY2023 turning negative
due to volatility in cotton prices witnessed. The liquidity profile of the entity is constrained due to unsecured loans being
withdrawn by directors over the last two fiscals which has adversely impacted its financial flexibility. With revenues and
operating profits witnessing moderations in FY2023, SRML’s coverage metrics and liquidity position has also been deteriorated.
The ratings also consider the established presence of SRML in the cotton spinning industry. However, it is constrained by its
weak financial profile, given the high working capital requirements and losses incurred resulting in weak leverage indicators.
Also, intense competition limits pricing flexibility and exposes its earnings to fluctuations in raw material prices.

Key rating drivers and their description

Credit strengths

Established track record and diversified product mix - SRML has a long operational track record of over three decades in the
spinning industry, resulting in established relationship with customers, which lends stability to volumes as witnessed over the
years. The company enjoys a diversified revenue base across domestic and export markets and across a wide range catering
to both apparel and home textile markets, lending some stability to performance.

Credit challenges

Non-payment on invocation of Corporate Guarantee – SRML had provided corporate guarantee to its subsidiary company
‘Tamilnadu Jai Bharath Mills Limited’. Subsequently in FY2023, the lender declared the account of subsidiary company as NPA

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 in December 2022 and invoked the corporate guarantee in March 2023. However, SRML has been unable to service the dues
of its subsidiary company. The dues remain unpaid as on date.

Weak financial profile - SRML’s financial profile remains weak constrained by weak earnings in FY2023, withdrawal of funds
from the company by its promoters through repayment of unsecured loans and concerns on succession planning with NCLT
order passed in June 2022 disqualifying directors of the company, which is likely to adversely impact SRML’s financial flexibility.

Intense competition limits pricing power – SRML operates in an intensely competitive and commoditised yarn industry,
characterised by low product differentiation and fragmented industry structure, which restricts pricing flexibility. Thus, the
earnings of market players remain exposed to the volatility in prices, which has constrained contribution levels witnessed
during FY2023.
Liquidity position: Poor

SRML’s liquidity position is poor due to non-payment of dues of its subsidiary company, post invocation of the corporate
guarantee by the bank. Further, its liquidity is also expected to remain poor due to losses incurred in FY2023. Further, the
directors have withdrawn unsecured loans to an extent of Rs. 50 crore and Rs. 9 crore, respectively in FY2022 and 9MFY2023
which has constrained its liquidity as well. Average working capital utilisation (as a percentage of its limits) in the past 12
months ending in March 2023 remains fully utilised as against its drawing power. SRML has no major capital expenditure plans,
with annual repayment obligation of Rs. 4.5- 7.0 crore between FY2024-FY2026 against estimated minimal cash accruals, its
liquidity is expected to remain strained.

Rating sensitivities

Positive factors – The ratings could be upgraded if the debt servicing of the guaranteed company is regularised, for a sustained
period, as per ICRA’s policy.

Negative factors – Not Applicable

Analytical approach

Analytical Approach Comments

Corporate Credit Rating Methodology
Applicable rating methodologies Rating Methodology for Entities in the Indian Textiles Industry – Spinning
Policy on default recognition
Parent/Group support Not Applicable
The ratings are based on the consolidated financial statements of SRML, and the details of
Consolidation/Standalone
the subsidiary consolidated are given in Annexure 2

About the company

Shri Ramalinga Mills Private Limited (SRML) is a part of the Sri Jayavilas Group (founded by Late Sathu T. Ramasamy Naicker),
based in Aruppukottai, Tamil Nadu. Incorporated in 1951, SRML is a closely held and deemed public limited company. It has
an installed capacity of 1,45,968 spindles and 3,312 rotors. SRML also has 15 windmills with a total power generation capacity
of 15 MW. Its subsidiary, Tamil Nadu Jai Bharath Mills Limited, has no operations under it and is in the process of liquidating
its fixed assets. Further, it has also been classified as NPA as of December 2022.

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 Key financial indicators (audited)

SRML Consolidated FY2021 FY2022

Operating income 325.1 441.1
PAT -9.7 14.4
OPBDIT/OI 7.1% 9.8%
PAT/OI -3.0% 3.3%
Total outside liabilities/Tangible net worth (times) 3.0 2.4
Total debt/OPBDIT (times) 8.8 3.9
Interest coverage (times) 0.8 2.2
PAT: Profit after tax; OPBDIT: Operating profit before depreciation, interest, taxes and amortisation; Amount in Rs crore

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Chronology of rating history

Current rating (FY2024)
for the past 3 years
Date & Date & Date &
Amount Date & rating in
Instrum Date & rating in Rating in rating in rating in
Amount outstandin FY2023
ent
Type rated g as of Dec FY2022 FY2021
(Rs. crore) 31,2022 Sep 29, Apr 20,
(Rs. crore) Jul 28, 2023 Apr 07, 2022 Apr 08, 2021 -
2023 2023
[ICRA]D
Term ISSUER NOT [ICRA]BB- [ICRA]BB-
1 Long term 26.37 22.81 [ICRA]D [ICRA]D -
Loans COOPERATI (Stable) (Stable)
NG
[ICRA]D
Cash ISSUER NOT [ICRA]BB- [ICRA]BB-
2 Long term 85.00 -- [ICRA]D [ICRA]D -
credit COOPERATI (Stable) (Stable)
NG
[ICRA]D
Unalloca
ISSUER NOT [ICRA]BB- [ICRA]BB-
3 ted Long term 66.67 -- [ICRA]D [ICRA]D -
COOPERATI (Stable) (Stable)
Limits
NG
Non-
fund [ICRA]D
Based- ISSUER NOT
4 Short term 2.50 -- [ICRA]D [ICRA]D [ICRA]A4 [ICRA]A4 -
Working COOPERATI
Capital NG
Facilities

Complexity level of the rated instruments

Instrument Complexity Indicator

Long Term Fund-based -Term Loans Simple
Long Term -Fund-based - Working Capital Facilities Simple
Long Term - Unallocated Limits NA

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 Short Term - Non-fund Based- Working Capital Facilities Very Simple

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

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 Annexure I: Instrument details

Coupon Amount Rated

ISIN Instrument Name Date of Issuance Maturity Current Rating and Outlook
Rate (Rs. crore)
Long Term Fund-based -
NA FY2021 - FY2028 26.37 [ICRA]D
Term Loans
Long Term -Fund-based
NA - Working Capital - - - 85.00 [ICRA]D
Facilities
Long Term -
NA - - - 66.67 [ICRA]D
Unallocated Limits
Short Term - Non-fund
NA Based- Working Capital - - - 2.50 [ICRA]D
Facilities
Source: Company

Please click here to view details of lender-wise facilities rated by ICRA

Annexure II: List of entities considered for consolidated analysis

Company Name Ownership Consolidation Approach

Tamilnadu Jaibharath Mills Limited 61.66% Full Consolidation
Source: Annual Report

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 ANALYST CONTACTS
Jayanta Roy Kaushik Das
+91 33 7150 1120 +91 33 7150 1100
[email protected] [email protected]

Ramakrishnan G S Jaswanth Ayyappan

+91 44 4596 4300 +91 44 4596 4320
[email protected] [email protected]

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
[email protected]

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected]

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

[email protected]

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Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
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