Jindal Stainless (Hisar) receives CARE A+ rating owing to robust business outlook
Jindal Stainless (Hisar) receives CARE A+ rating owing to robust business outlook
One of India's largest stainless steel producers, Jindal Stainless (Hisar) Ltd has received a positive upgradation from CARE Ratings for both long-term as well as short-term bank facilities.
For long-term bank facilities, the rating has been upgraded to ‘CARE A+’ from the previous rating of 'CARE A-‘. For short-term bank facilities, the rating has been upgraded to 'CARE A1+’ from its earlier rating of 'CARE A2+’.
A rating of this level implies a very low credit risk that the company bears and a high level of safety when it comes to the timely payment of financial obligations. The rating upgrade has come on the basis of strong operational and financial performance of JSHL in FY21.
Let’s have a look at the rationale behind the rating upgrade by CARE:
Despite the COVID-19 breakout, the operating profit margin has inched up to 12.89 per cent in FY21 from 11.35 per cent in FY20 due to increased sales of higher-margin products and speciality steel. The PAT margin has also moved up from 3.80 per cent in FY20 to 5.63 per cent in FY21 due to lesser interest costs due to sizeable debt reduction.
The company has managed to reduce debt from Rs 2,885 crore in FY20 to Rs 2,487 crore in FY21. CARE estimates the trend to continue on the back of healthy cash flows.
JSHL is under process for capacity expansion of its speciality steel division since it has been contributing greatly to the profits. Also, the shifted focus on value-added products, which generate higher returns, has given JSHL, a competitive edge.
JSHL is expected to merge in Jindal Stainless Ltd to form a single entity: JSL, which will then become one of the top ten global stainless-steel manufacturers. Although statutory approvals are pending, the company has received approval from SEBI and the merger is expected to be completed by H2FY22.
The rating upgradation has been the testimony of robust operational efficiency and improved financials of the company.
The stock was trading at Rs 208.35, down by 1.79 per cent at 2.26 pm on Friday.