Crisil reaffirms AA, A1+ ratings on Welspun Corp's bank facilities, debt programmes
Sep 05, 2020
Mumbai (Maharashtra) [India], Sep 5 : Welspun Corp said on Saturday that Crisil has reaffirmed its ratings on Rs 5,825 crore bank facilities and debt programmes at AA and A1-plus.
At the same time, the agency has withdrawn its ratings on the non-convertible debentures of Rs 900 crore of the company as they have been redeemed.
Crisil had upgraded the rating on long term bank facilities and non-convertible debentures of Welspun Corp to AA/stable from AA-minus/positive and rating on the short-term bank facilities and commercial paper reaffirmed at A1-plus on August 31.
The upgrade reflects the strengthening of the Welspun group's business risk profile backed by improvement in capacity utilisation in all the three regions -- India, the United States and Saudi Arabia -- leading to strong revenue growth and better operating profitability.
Crisil said the company's revenue increased by 29 per cent in FY20 while consolidated operating margin improved to 14.3 per cent from 7.7 per cent a year earlier. Profitability improvement was driven by strong operating margins in Saudi Arabia unit which has historically been a drag on profitability.
Despite Covid-19-led disruptions across geographies, the group may not face any major moderation in its revenue profile, backed by steady order book movement and a reasonable performance in the first quarter of FY21.
In the first quarter, said Crisil, the group recorded consolidated revenue of more than Rs 2,300 crore with outstanding orders worth 0.8 million kilo tonne as on date.
The financial risk profile has further strengthened with prepayment of debt in Q1 FY21. Given healthy cash generation and progressive debt repayment, capital structure is expected to remain healthy with net gearing (debt less unencumbered cash to networth) of less than 0.5 time as on March 31.
Liquidity is expected to remain strong backed by strong cash flow and management stance of maintaining surplus cash and cash equivalent of more than Rs 500 crore at any given time.
Crisil said the ratings continue to reflect a strong business risk profile, backed by leadership position in the global steel line-pipe business, geographically diverse capacities, a steady order flow, expected sustained improvement in operating margin and prudent risk-management strategies.
