ICRA has assigned LBBB- (pronounced L triple B minus) rating to the Rs.38.4 crore term loan facilities and the Rs.3.0 crore fund based facilities of Rajapalayam Mills Limited (“RML” / “the Company”). ICRA has also assigned A3 (pronounced A three) rating to the Rs.2.0 crore fund based facilities and the Rs.3.0 crore fund based sub-limit facilities of RML. ICRA has LBBB- (pronounced L triple B minus) rating outstanding on the Rs.225.2 crore term loan facilities, the Rs.86.0 crore fund based facilities and the Rs.3.0 crore non-fund based (sub-limit) facilities of RML. ICRA also has A3 (pronounced A three) rating outstanding on the Rs.20.0 crore term loan facilities, the Rs.91.0 crore fund based facilities (enhanced from Rs.41.0 crore), the Rs.40.0 crore fund based (sub-limit) facilities, Rs.5.7 crore non-fund based facilities and the Rs.7.0 crore non-fund based (sub-limit) facilities of RML. The outlook on the 
long-term rating is stable.

The ratings consider the financial flexibility enjoyed by RML by virtue of being part of the Ramco Group and the significant experience of promoters in spinning. RML forms part of the Ramco Group, which has diverse presence across cement, fibre cement products, spinning and software systems. The Group comprises entities like Madras Cements Limited [the bank facilities of which rated LA+ (Stable) and A1+ by ICRA] and Ramco Industries Limited [the bank facilities of which are rated LA- and A1 by ICRA]. The Company benefits from economies of scale in the collective procurement of cotton for all spinning companies in the Ramco Group and also from the production of value-added yarn which entails relatively higher realizations / margins. RML‟s balanced presence across the lower, medium and finer count varieties is expected to mitigate risks related to product concentration to an extent. The ratings are however constrained by the stretched gearing levels and coverage indicators, owing to significant debt-funded capital expenditure incurred during the last few fiscals and the consequent high interest costs. Although yarn realizations have increased significantly in the recent past, the fragmented industry structure is likely to spur increased competition in the event of downturn in demand for yarn and thereby restrict the pricing flexibility of spinners. While cotton costs are expected to moderate on the back of healthy production, the recent restriction on yarn exports is likely to moderate the realizations too. The textile industry in India remains vulnerable to competitive pressures from countries enjoying better scale economics / lower foreign exchange fluctuations.