Crisil Ratings has revised the outlook on Rs 4,000 crore long-term bank facilities of vertically integrated textile and paper manufacturer Trident Ltd from stable to positive and reaffirmed the rating at AA-minus.
The rating on short-term bank facilities and commercial paper programme was reaffirmed at A1-plus.
Crisil said the rating action reflects healthy improvement in financial risk profile of the company post significant reduction in debt over the last few quarters supported by the ramp-up of operational performance in home textiles division this fiscal.
The company has reduced its debt from Rs 1,952 crore as on March 31, 2020 to Rs 1,059 crore as on December 31, 2020 through prepayments from internal accrual, controlled capex as well as non-recourse factoring initiatives.
The traction in the home textile division also remains strong with both bed sheets and towels segments reaching the highest capacity utilisation since inception in third quarter of this fiscal.
The strong demand for home textiles stemmed from increased stay-at-home period and focus on health and hygiene for consumers is expected to remain healthy in next fiscal.
The capacity utilisations in cotton yarn segment also reached 97 per cent in third quarter of this fiscal, higher than pre-Covid levels, partially owing to increased captive consumption for increased production of home textiles as well as the rebound in cotton yarn demand in the industry.
Crisil said Trident's paper segment also has seen a ramp-up albeit gradual with utilisation levels reaching 87 per cent in third quarter.
Over medium term, the aggregate revenues are expected to grow by 15 per cent per annum as against compounded annual growth rate of 2 per cent during fiscal 2018 to 2020, led by continued traction in home textiles and cotton yarn as well as recovery in the paper segment as well as commissioning of planned capacity addition.
The company's operating profitability has remained healthy at 18.5 per cent in nine months of fiscal 2021 as against 18 per cent in fiscal 2020 in spite of Covid impact in first quarter, owing to cost optimisation initiatives undertaken by the company.
Over medium term, the operating margins are expected to remain stable between 18 to 20 per cent per annum. Lower capex intensity in fiscal 2020 and 2021 as well as healthy annual cash accrual of Rs 400 crore to 600 crore coupled with usage of non-recourse factoring has resulted in sharp reduction in debt levels.
As a result, the net debt/EBIDTA is expected to improve to below 1.5 times for fiscal 2021 from 2.3 times in 2019 and to remain below 1.5 times over medium term.
Crisil said Trident's liquidity profile remains healthy supported by cash and equivalents of Rs 80 crore and unutilised bank limits of Rs 300 crore in February.
( With inputs from ANI )
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