ICRA reaffirms credit ratings of Gokak Textiles; Stock soars 5%

3 Jan 2022 , 11:55 AM

Gokak Textiles Ltd has informed that ICRA Limited has reaffirmed the credit rating of the company.

ICRA reaffirmed unallocated (rated on short term scale) worth Rs50cr to [ICRA] A4.

The reaffirmation in ratings of Gokak Textiles Limited’s (GTL) favourably factor in the company’s strong parentage–Shapoorji Pallonji and Company Private Limited (SPCPL).

The parent provides regular financial support in the form of interest bearing unsecured loans/inter-corporate deposits (ICDs) (Rs106.3cr as on March 31,2021) to meet the company’s funding requirements.

The ratings however remained constrained by weak operational and financial performance for the last few years, characterised by stretched liquidity, negative net worth and inadequate coverage metrics owing to a moderate level of revenues and continuous losses at the operating level.

The ratings also consider the highly fragmented and competitive industry structure, which restricts pricing flexibility and exposes the company’s earnings to volatility in cotton prices and foreign exchange rates, said ICRA in a ratiolane report.

At around 11:56 AM, Gokak Textiles was trading at Rs31.70 apiece up by Rs1.5 or 4.97% on Sensex.