Ind-Ra rated Ramkrishna Forgings’ bank facilities at 'A' with stable outlook

The domestic CV operations contributed about 42% to RKFL’s consolidated revenues in FY21 (FY20: 46%) while CV exports accounted for 41% (36%).

Jul 20, 2021 12:07 IST India Infoline News Service

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Ramkrishna Forgings Limited has been assigned ‘IND A’ with Stable outlook rating by India Ratings & Research for its Bank facilities.

IND A/Stable and IND A1 has been assigned to Non fund based working capital limits.

Rating Rationale:

Improving Business Profile: Over FY18-FY21, RKFL has been working on de-risking its business model from domestic commercial vehicle (CV) segment, by diversifying across different segments, customers and geographies. The domestic CV operations contributed about 42% to RKFL’s consolidated revenues in FY21 (FY20: 46%) while CV exports accounted for 41% (36%).

While RKFL’s consolidated revenue from domestic operations was largely flat in FY21, the 6% yoy growth in the overall revenues was mainly led by a 20% yoy increase in exports.

Over FY20- FY21, the company has added customers in Europe, started exporting to South America and started supplying to the US for Class 5 trucks as well in addition to its existing supplies of Class 8 trucks. 

Large Capex to Boost Expansion: During FY20, RKFL announced its capex plan to incur about INR3,600 million over FY20-FY21 towards adding three new press lines to increase its total capacity to about 187,000 tonnes, once fully commissioned (FY20: 150,000 tonnes). Of this, around INR3,000 million was incurred over FY20-FY21 and the remaining would be incurred in FY22, largely debt-funded.

While two of these facilities are operational, the third is likely to be operational by August 2021. Ind-Ra does not expect any major incremental debt in FY22, as the size of capex is small. The agency also expects the company to benefit from this increased capacity as the facilities ramp-up with a likely improvement in the CV industry by 2HFY22.

Commenting on the ratings Lalit Khetan, Executive Director & CFO, Ramkrishna Forgings Limited said: “Assignment of IND A and IND A1 ratings with Stable outlook to our bank facilities by India Ratings is a testimony to our continual multi-pronged improvement in our business operations. The improvement in ratings as compared to our previous ratings will enable us to reduce our rate of interest on our banking facilities leading to lowering of our finance cost going forward.”

At around 12:07 PM, Ramkrishna Forgings was trading at Rs757.85 apiece down by Rs2.1 or 0.28% on Sensex.

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