Ind-Ra upgrades Eveready's long-term credit ratings, outlook positive

Rating agency says upgrade reflects improvement in firm's financial profile and liquidity in 1HFY21, which was continuing in 2HFY21 backed by better profitability

Eveready Industries India informed the stock exchanges on Tuesday that India Ratings and Research has upgraded its long term credit ratings, reflecting an improvement in the company’s financial profile and liquidity position.

In a filing with the exchanges, Eveready said that the company’s long-term credit ratings had been upgraded to 'IND BBB-' from 'IND BB+' and the outlook remained positive.

India Ratings said that the upgrade reflected an improvement in Eveready Industries India’s (EIIL’s) financial profile and liquidity position in 1HFY21, which was continuing in 2HFY21 backed mainly by a substantial improvement in profitability.

The positive outlook reflects Ind-Ra’s expectations of a further improvement in the business profile and the liquidity position over FY22 aided by the sustained performance of the batteries and flashlight segments, the likely improvement in the performance of the lighting and appliance segments, a possible resolution of the contingent liability issue and the possibility of a managerial/board representation by the Burman family, the largest shareholder of EIIL, the rating agency said.

 

Among key rating drivers were an improvement in financial profile backed by substantial EBITDA expansion in FY21. Despite a fall in revenues due to Covid disruptions, EIIL’s profitability had improved and it recorded a significant jump in EBITDA margins. 

Ind-Ra expects EIIL’s EBITDA margins over FY21-22 to stabilize at 14-16 per cent, helped by the improved performance of the lighting and appliance segments over 2HFY21-FY22.

However, even as the company was doing operationally well, the holding of promoters – the Khaitan family – dropped to around five per cent from 23 per cent in March. The Burman family holds about 19.8 per cent in EIIL and is the largest shareholder. So far, the Burmans don’t have board representation in the company.  

The rating agency also noted that the credit metrics of the company had improved and was expected to sustain over FY21-22. EIIL’s liquidity position, too, has improved over year-to-date FY21.

The Eveready stock closed at Rs 212.90 on the Bombay Stock Exchange. In the last three months, it has appreciated about 44.29 per cent.