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CRISIL upgrades Pokarna's ratings at BBB/Positive/A3+; Stock under pressure

The rating on the proposed long-term bank loan facility of Rs71cr has been withdrawn at the company’s request.

November 18, 2021 12:42 IST | India Infoline News Service
CRISIL Limited has upgraded the credit ratings on Pokarna Limited’s total bank loan facilities Rs60cr (Reduced from Rs131cr). The long-term rating has been upgraded to CRISIL BBB/Positive from CRISIL BBB-/Stable.

The credit rating agency has also upgraded the short-term rating of the company at CRISIL A3+ from CRISIL A3.

Also, the rating on the proposed long-term bank loan facility of Rs71cr has been withdrawn at the company’s request.

At around 12.44 pm, Pokarna Ltd was trading at Rs616.60 per piece down by Rs6.9 or 1.11% from its previous closing of Rs623.50 per piece on the BSE.

“The rating action reflects moderation of project risk with the commencement of commercial operations at the new quartz surfaces unit and stabilization of operations, as per expected timelines. The Pokarna group had undertaken a large capital expenditure (capex) of over Rs470cr for setting up a greenfield quartz surfaces manufacturing unit, which was commissioned on March 24, 2021.

Post commencement of operations and quick stabilisation, revenue is estimated to grow by 60-70% in fiscal 2022, to over Rs470cr, led by robust demand. Operating margin should also sustain at 30-32% over the medium term, resulting in healthy debt protection metrics. Financial risk profile will continue to be aided by the adequate net cash accrual and absence of any major debt funded capex plans,” company shared CRISIL’s rating rationale.

It further said, the rating action also factors in sufficient liquidity and financial flexibility, post completion of major capex. Consequently, bulk of the cash accrual will be utilised to fund the incremental working capital requirement and reduction of debt. This in turn is likely to strengthen the capital structure and debt protection metrics. Healthy flow of orders leading to higher capacity utilisation at the new unit, and sustenance of profitability are key monitorables.

The ratings also reflect the established market position of the group in the granite and engineered stones businesses, supported by extensive experience of its promoters, established client relationships and the healthy operating margin. These strengths are offset by susceptibility to moderate demand risk and fluctuations in foreign exchange (forex) rates.

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