ICRA has assigned `LBBB` rating, indicating moderate-credit-quality, to the Rs 1,473.8 million term loan facility and Rs 276.5 million fund based limits of Hinduja Foundries (HFL). ICRA has also assigned `A2` rating, indicating above-average-credit-quality, to the Rs 232.7 million fund based limits and Rs 217.0 million non-fund based limits of HFL.
The rating factors in HFL`s long standing presence, strong customer profile in automotive specialty castings and favourable economies of scale. The rating also factors in the healthy long-term prospects in HFL`s customer industry (automobiles) and its plans to tap exports opportunities to diversify revenue base.
HFL`s promoters` have demonstrated their commitment to the Company`s operations through preference capital infusion. The rating is constrained by the weak financial profile, reflected in moderate profitability and stretched leverage. The rating factors in HFL`s high client concentration on group company.
The domestic castings industry is highly fragmented and characterized by high competitive pressure, resulting in weak pricing power. The industry remains vulnerable to cyclicality of the automobile industry and increase in raw material costs, which companies are compelled to partly absorb due to poor pricing power with automobile OEMs.
Shares of the company closed up Rs 14.35, or 10.25%, at Rs 154.35. The total volume of shares traded at the BSE was 3,575. (Friday)
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