Banswara Syntex Limited (BSL) has received credit ratings for its bank facilities and fixed deposit program from India Ratings and Research Pvt. Ltd. The rating agency assigned a rating of IND A/Negative/IND A1 to BSL's bank loan facilities of INR 513.2 crore. The fixed deposit program of INR 300 crore (reduced from INR 400 crore) was affirmed at IND A/Negative. Additionally, bank loan facilities amounting to INR 7,491 crore were affirmed at IND A/Negative/IND A1.

The Negative Outlook is attributed to expectations that BSL's credit metrics will remain stretched in the medium term due to a term loan availed for modernization capex and lower-than-estimated operational performance in the first half of FY26. However, India Ratings anticipates an improvement in credit metrics in the second half of FY26, supported by a recovery in operational performance and an improved EBIDTA stemming from modernization capex.

The ratings are also supported by the company's strong business profile and comfortable liquidity position, despite significant debt-funded capex. Financial performance is expected to improve from the second half of FY26, driven by a higher contribution of value-added products, particularly from the garment segment, coupled with improved production efficiency and cost optimization from the modernization capex. The company also plans to optimize power costs by participating in group captive renewable energy initiatives, expected to be operational from the first half of FY27.

However, the ratings are constrained by large debt-funded capex, which is likely to result in elevated net leverage, peaking in FY26 and gradually deleveraging from FY27 onwards. Key rating drivers include expected improvements in operational efficiency and cost savings to support profitability, adequate liquidity, a strong business profile, and resilient EBITDA margins despite industry headwinds. Weaknesses include a higher-than-estimated timeline for operational recovery, with performance pickup likely in the second half of FY26, moderation in credit metrics, and exposure to price volatility, as well as inherent industry and forex risks.

BSL's net adjusted leverage increased to 4.75x in FY25, and gross interest coverage reduced to 2.56x, impacted by high debt-funded capex and lower absolute EBITDA. The agency expects net adjusted leverage to peak in FY26 and reduce gradually below 3.00x beyond FY28. Liquidity is expected to remain adequate in FY26, despite a negative operational free cash flow due to ongoing capex. The company's monthly average utilization of fund-based limits was around 67.5% for the 12 months ended November 2025.