CRISIL upgrades credit rating of Sportking India

26 Apr 2022 , 02:10 PM

The rating agency has upgraded the companys long-term rating to CRISIL A/Stable from CRISIL A- / Stable. It has also upgraded the short-term rating to CRISIL A1 from CRISIL A2+ .

CRISIL Ratings said that the upgrade reflects better than expected operating performance driven by higher demand from export as well as domestic market/ customers resulting in revenue growth of around 75% in the first nine months of fiscal 2022 over the corresponding period of the previous fiscal 2021.

Operating margins too improved significantly to 28% over nine months through fiscal 2022 from 12% in the corresponding period of the previous fiscal driven by favorable spread between prices of raw cotton and cotton/ synthetic yarn given the improved demand scenario and benefit of higher utilization.

However, operating margins though expected to moderate from current peak levels, however are expected to remain higher than the historical levels because of structural change in export market and will remain a key rating sensitivity factor.

Working capital requirement will remain high due to increased raw material prices, however higher accruals will reduce dependence on external working capital debt.

The company is undergoing capacity expansion of 40,800 spindles at capital cost of Rs 175 crore funded by debt of Rs 125 crore. The capacity is expected to be commissioned by Sep2022 and will further strengthen the business profile of the company.

Also, company is also setting up 10 MW capacity Rooftop Solar Power Project costing about Rs. 30 crs for captive power consumption expected to be commissioned by May 2022.

Timely execution of the capex within budgeted cost and achieving expected ramp up will be key monitorable, CRISIL said.

Sportking India is a part of the Sportking Group. The company manufactures cotton, synthetic and blended yarn in counts ranging from 20s to 46s. It has manufacturing units in Punjab. The company has large size capacity of 2.75 lakh spindles and dyeing capacity of 20 tonne per day. It manufactures value-added yarns, such as compact, sustainable and contamination-free cotton yarn, which provide higher realisations than normal cotton yarn.

For the nine months ended 31 December 2021 relating to fiscal 2022, the company reported profit after tax of Rs 305 crore on the operating income of Rs 1,61 crore compared to Rs 40 crore and Rs 893 crore respectively for the corresponding period in the previous fiscal 2021.

The scrip rose 0.54% to currently trade at Rs 1321 on the BSE.

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