MTAR Technologies Limited - Ratings upgraded to 'CRISIL A-/Stable/CRISIL A2+'

CRISIL Ratings has upgraded its ratings on bank facilities of MTAR Technologies Limited (MTAR) to 'CRISIL A-/Stable/CRISIL A2+' from 'CRISIL BBB+/Positive/CRISIL A2'.

The rating action reflect MTAR's strong orderbook across product segments providing healthy revenue visibility and expected increase in scale of operations to over Rs 300 crore in current fiscal (year-on-year growth of 16-17%). The upgrade also factors in strengthening of financial risk profile with minimal debt as well as presence of strong liquidity in the form of cash surplus of around Rs194 crore as on March 31, 2021. In fiscal 2022, net cash accrual is expected to increase to Rs 60-70 crore with operating profitability is expected at 31-33% in the medium term.

Revenue grew at CAGR of 25% over last 5 fiscals through 2021 and is expected grow at over 25% in the medium term driven by healthy offtake from its key customer Bloom Energy Corporation (Bloom) and healthy order book with customer such as Nuclear Power Corporate of India Ltd (NPCIL), and Indian Space Research Organization (ISRO). Given critical and technically complex products, MTAR is expected to sustain operating profitability 31-33% in the medium term. As a result, net cash accruals are expected to sustain over to Rs 60 core crore in the medium term.

Given the healthy increase in order book from existing customers like NPCIL and ISRO as well as addition of new orders from various prospective customers, MTAR plans to set up a new facilities in Hyderabad to cater to the increased demand. Total capital expenditure of Rs 105 crore in 2022 for setting up fabrication and sheet metal facility is envisaged. Prudent funding of this capex and healthy cash accruals will support maintaining gearing below 0.20 time in fiscal 2022. Debt protection metrics remain comfortable, with interest coverage and net cash accruals to total debt ratios seen at around 11 times and 2.43 times, respectively in fiscal 2021.

Liquidity is expected to remain comfortable with cash surplus of Rs.194 crore and net cash accruals of Rs 60-70 crores. Bank limit of Rs 58 crore remain utilised at an average of 40% over the six months ended June 2021, short term borrowing is expected to remain low further as the company will be using part of its IPO proceeds to fund its working capital requirements.

Ratings continue to reflect healthy business risk profile of MTAR marked by strong order book, long standing relationship with customers, strong export diversity and healthy operating profitability. The ratings also benefit due robust financial profile bolstered by recent IPO with healthy accruals and debt protection metrics. These strengths are partially offset by large working capital requirement, customer concentration risk and susceptibility to risks inherent in a tender-based business.

Shares of MTAR Technologies Limited was last trading in BSE at Rs. 1478.35 as compared to the previous close of Rs. 1477.25. The total number of shares traded during the day was 21457 in over 2296 trades.

The stock hit an intraday high of Rs. 1499.9 and intraday low of 1455.05. The net turnover during the day was Rs. 31710551.

Source : Equity Bulls

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