CARE reaffirms Trident credit rating; Revises Outlook to Positive

4 Apr 2022 , 01:17 PM

The ratings of the bank facilities Rs2,480.76 crore of Trident Limited have been upgraded/ reaffirmed by CARE Ratings Limited.

The rating on long-term bank facilities Rs690.76 crore has been reaffirmed at CARE AA; Positive. Outlook revised from Stable. For long-term / short-term bank facilities Rs1,590 crore CARE AA; Positive / CARE A1+ has been reaffirmed. Outlook revised from Stable. For short-term bank facilities Rs200 crore CARE A1+.

At around 1.20 pm, Trident Ltd was trading at Rs54 per share up by Rs0.3 or 0.56% from its previous closing of Rs53.70 per share on the BSE.

“The ratings assigned to the bank facilities of Trident Limited (Trident) continue to derive strength from its experienced management, diversified and integrated nature of operations across textile and paper with optimum utilisation of installed capacities, geographically-diversified revenue stream, long and established customer relationship with large global retailers for its home textile business, and benefits of fiscal incentives announced by the Government of India for the textile sector,” company shared CARE Ratings rationale. 

It added, the ratings also take cognizance of the healthy growth in its total operating income (TOI) along with significant improvement in its operating profitability (PBILDT) and cash accruals during 9MFY22 (FY refers to period April 01 to March 31), backed by healthy export demand for home textile as well as higher profitability in cotton yarn, leading to improvement in debt coverage indicators and liquidity.

These rating strengths are, however, partially offset by its working capital-intensive operations, susceptibility of profitability margins to volatility in cotton and cotton yarn prices and foreign exchange rate movements, along with its presence in the inherently cyclical, fragmented and competitive textile and paper industries. The ratings also take cognisance of the company’s large-size debt-funded project, which may result in some moderation in its leverage over the next two years from the present level, apart from the inherent implementation and stabilisation risks associated with such a large project.

Outlook: Positive
The ‘Positive’ outlook reflects the expectation of significant growth in Trident’s scale of operations over the medium term, aided by healthy capacity utilisation across each of its business segments, thus leading to sustained healthy operating profitability margins along with significant improvement in its return of capital employed (ROCE) and debt coverage indicators. The outlook may be revised to ‘Stable’ if its profitability margin, leverage, and debt coverage indicators remain lower than envisaged.