Trident Limited - Long-term rating upgraded to 'CRISIL AA/Stable', short-term rating reaffirmed

CRISIL Ratings has upgraded its rating on the long-term bank facilities of Trident Ltd (Trident) to 'CRISIL AA/Stable from 'CRISIL AA-/Positive'. The rating on the short-term facilities and Commercial Paper has been reaffirmed at 'CRISIL A1+'.

The rating action reflects the expectation of continued healthy business performance and strong financial risk profile of Trident. Business risk profile continues to improve with traction visible in the home textile segments, both in bed sheets and towels, resulting in improved capacity utilisation. The strong upsurge in demand for home textiles is driven by continued higher stay-at-home period and consumers' focus on health and hygiene. Financial risk profile remains strong with robust accruals and phased capital expenditure (capex) plan. The company has reduced its debt from Rs 1952 crore as on March 31, 2020 to Rs 1536 crore as on March 31, 2021 through prepayments from internal accrual, controlled capex as well as nonrecourse factoring initiatives.

The capacity utilisations in the cotton yarn segment also reached 97% in the first quarter of fiscal 2022, higher than pre-Covid levels, partially owing to increased captive consumption for production of home textile products as well as strong rebound in the cotton yarn demand and realisations in the industry. Paper segment has also seen ramp up, albeit gradually, with utilisation levels improving to 85% in the first quarter of the current fiscal. In fiscal 2022, the aggregate revenues are expected to grow by over 20%, led by low revenue base of last year, continued traction in home textiles and cotton yarn, recovery in the paper segment, as well as commissioning of planned capacity addition. Furthermore, operating profitability is expected to sustain to over 20%, also supported by implementation of Rebate of State and Central Taxes and levies (RoSCTL) incentives and due to benefit of higher scale.

Company plans to undertake capex of Rs 1400-1500 crore over the medium term which will be funded by debt of around Rs 1000 crore. The repayment obligations for these loans are back ended which will support the overall financial risk profile and liquidity. Net debt/earnings before interest, depreciation, tax and amortisation (EBIDTA) is expected to remain below 1.5 time for fiscal 2022 against 1.4 times in fiscal 2021 and to remain close to 1 time over the medium term. Liquidity profile remains healthy, supported by cash and equivalents of over Rs 200 crore and unutilised bank limits of Rs 1000 crore as on June 2021.

Business profile remains healthy marked by Trident being the second largest player in home textiles and yarn manufacturing segments in India, apart from being one of the leading manufacturers of writing and printing (WPP) paper in North India. The rating continues to reflect Trident's diversified revenue profile with leading market position in the home textiles segment and established position in WPP, strong operating efficiency driven by integrated operations, and strong financial risk profile. These strengths are partially offset by exposure to volatility in cotton prices and fluctuations in foreign exchange (forex) rates, working capital-intensive operations, and susceptibility to slowdown in the end-user market and competition in the home textiles segment.

Shares of Trident Ltd was last trading in BSE at Rs. 26.75 as compared to the previous close of Rs. 25.75. The total number of shares traded during the day was 8472309 in over 20422 trades.

The stock hit an intraday high of Rs. 27 and intraday low of 25.3. The net turnover during the day was Rs. 222301990.

Source : Equity Bulls

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