The credit ratings agency has revised the long-term rating to [ICRA]A+ from [ICRA]A and has also revised the outlook on the same to positive from stable. It has upgraded the short-term rating to [ICRA]A1+ from [ICRA]A1.
ICRA said that the rating upgrade and revision in outlook factors in the better-than-expected financial performance of Indian Metals & Ferro Alloys (IMFA) in FY2021, as reflected in the companys healthy revenue growth, a rise in operating profits and an improvement in the profit margins.
The strong performance continued in Q1 FY2022 with the company posting its best-ever quarterly performance in the recent years with a approximately 35% quarter-on-quarter (QoQ) growth in the operating profits.
ICRA believes that IMFAs business outlook remains favourable for the remainder of FY2022 with resilient demand for ferro chrome amid rising stainless steel production globally.
Moreover, production restrictions on ferro-chrome imposed by the Chinese authorities resulted in ferro chrome realisations inching towards all-time high levels in Q1 FY2022.
The company reported an OPBIDTA/tonne of Rs. 13,119 in FY2021, which further increased to Rs. 29,162 in Q1 FY2022 on the back of a sustained improvement in ferro chrome prices globally.
Met coke prices, for which the company depends on external sources entirely, have increased consistently in the recent months. However, ICRA does not expect any significant deterioration in ferro chrome spreads for IMFA as ferro chrome realisations have also maintained an upward trend.
In addition, IMFAs low-cost met coke inventory can cover a large part of its requirement for the current fiscal, which in turn would support IMFAs ferro-chrome spreads to remain at healthy levels in FY2022.
Aided by an improvement in ferro chrome prices, the credit profile of the company witnessed a significant improvement, strengthening its credit metrics in FY2021 and Q1 FY2022.
Healthy profitability and cash accruals are not only expected to support accelerated deleveraging in the current fiscal but would also result in a build-up of a sizeable cash/liquid investment portfolio, boosting the companys financial flexibility.
?Utilisation of free cash flows towards aggressive deleveraging initiatives will remain a key monitorable,? the ratings agency said.
Indian Metals & Ferro Alloys primarily produces ferro alloys, including charge chrome (high carbon ferro chrome), and has an installed furnace capacity of 190 MVA (284,000 MTPA) in its two plant sites at Therubali and Choudwar, in Odisha. The companys operations are supported by a 200-MW captive thermal power plant at Choudwar, captive chromite mines and a 4.5-MW solar power plant.
The scrip rose 2.67% to end at Rs 705 on the BSE today.
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