Loyal Textile Mills Limited — Credit Ratings, 20-03-2025: Credit Rating

Loyal Textile Mills Limited has reported a continued decline in financial performance, leading to a downgrade in credit ratings. The company's operating income fell by 33% to ₹944.43 crore due to a slowdown in export demand, particularly affecting the knitted fabrics segment. Operational losses reached ₹31.26 crore, which were somewhat offset by a non-operating income of ₹68.58 crore.

Despite efforts to move towards higher-margin garment sales, high overhead costs and an inability to pass on increased raw material costs contributed to ongoing losses. The company reduced its working capital borrowings significantly from ₹622.16 crore to ₹472.5 crore through asset sales, though its overall gearing remains moderate at 2.15x.

Liquidity is stretched, highlighted by a current ratio of 0.80 and high average working capital utilization at approximately 98.39%. The net cash balance as of September 30 stood at ₹3.19 crore. A recovery in profitability hinges on successful asset monetization and an upturn in demand.

Investor Insight: Given the financial challenges and ongoing operational losses, a cautious stance is warranted. Emphasizing a shift towards profitable product lines and managing costs will be critical for future recovery initiatives.