The agency has reaffirmed its short-term rating on the same at ‘Crisil A1’.
Crisil Ratings stated that the rating upgrade reflects the improvement in the business risk profile of Sportking, with fiscal 2025 revenue reaching above Rs. 2500 crores and operating margin improving to 10.6%, from 10.1% in fiscal 2024.
The revenue of the company is expected to increase by 1-3% to
Rs. 2600 crores in fiscal 2026 as it is operating near full capacity.
Further, the operating margins are expected to remain healthy at 10.5-11.5% in fiscal 2026, supported by stable spreads, and minimal inventory losses. The margins are expected to improve to 11-12% over the medium term, supported by additional use of solar power, resulting in lower power costs.
Additionally, the financial risk profile continues to remain healthy with debt/ebitda at 2.17 times and interest cover of 5.7 times fiscal 2025.
The overall debt levels for the company had reduced significantly, in fiscal 2025 driven by lower short-term debt on account of significant procurement by CCI, obviating the need for holding inventory. This is expected to normalize this fiscal and debt is accordingly expected to remain around Rs 650-700 crores for fiscal 2026.
Given the capacity utilization remains at nearly 95%, any significant debt funded capex will remain a key monitorable.
The debt protection metrics of the company are expected to remain comfortable, with the interest coverage and net cash accrual to adjusted debt (NCAAD) ratios expected to improve in the medium term. Moreover, gearing and total outside liabilities to tangible networth (TOL/TNW) ratios are also likely to improve in the medium term.
These strengths are partially offset by the large working capital requirement and susceptibility to volatility in raw material prices and foreign exchange (forex) rates.
Sportking India is a part of the Sportking group. The company manufactures cotton, synthetic and blended yarn in counts ranging from 20s to 46s. It has units in Ludhiana and Bathinda, both in Punjab. The company has a large capacity of 3.79 lakh spindles and dyeing capacity of 20 tonne per day. It manufactures value-added yarns, such as compact, sustainable and contamination-free cotton yarn, which provide higher realisations than normal cotton yarn.
The scrip fell 2.34% to end at Rs 118.30 on the BSE.