Up 113% in 4 weeks! This specialty steel stock now trades at 13-year high

Acuite Ratings & Research Limited upgraded the ratings of various credit facilities and exposures of the company with a 'stable' outlook

Shares of Mukand scaled a 13-year high of Rs 118.80, up 7 per cent, on the BSE in intra-day trade on Tuesday. In the past five trading days, the stock has rallied 39 per cent after the rating agency Acuité Ratings & Research Limited (“ACUITE”) upgraded the ratings of various credit facilities and exposures of the company with a 'stable' outlook.

Since March 23, the stock of the company engaged in specialty steel business has zoomed 113 per cent from the level of Rs 55.80, as compared to a 3.7 per cent decline in the S&P BSE Sensex. It is trading at its highest level since January 2008.

Acuite in its rating rationale said the rating upgrade and revision in the outlook from ‘Negative’ to ‘Stable’ are driven by the company’s significant progress in land parcel monetisation and disinvestment in a joint venture company while utilising the proceeds to repay the outstanding debt from lenders and group companies, thereby improving the financial risk profile of the company.

The company has received nearly Rs 1,510 crore through these transactions during FY2021 and reduced debt to a major extent which is also expected to reduce the interest burden. Acuité believes that the monetisation transactions will not only strengthen the overall capital structure and the liquidity position of the company but also lead to an uptick in net profitability levels going forward. Further, there is a significant likelihood of the completion of a second phase of the monetisation plans in FY2022 which should reduce the debt further and support the working capital requirement of the company, the rating agency added.

On March 27, the company's chairman Niraj Bajaj and co-chairman Rajesh V Shah said in a communication to shareholders that the company has completed the transfer of approximately 55 acres of surplus leasehold land at Thane to NTT Global Data Centers Nav2 and received total consideration of Rs 801.51 crore, including taxes, which shall, amongst other things, be utilised for debt repayment of the company.

Mukand has also completed the sale of the first tranche of shares in the joint venture, Mukand Sumi Special Steel (MSSSL) to Jamnalal Sons and received a consideration of Rs 713.61 crore. The second and final tranche of sale of shares worth Rs 500 crore will be completed in April, Q1 of FY 2021-22. This amount will be utilised for further debt repayment, they said.

The company will continue to retain ownership of its alloy steel manufacturing assets in Ginigera, Karnataka, and the income derived from the sale of its alloy steel products to the joint venture, MSSSL.

The management said during the financial year 2020-21, the company reduced its debt and other interest-bearing liabilities by more than Rs 975 crore. With a considerable reduction in interest rates, the total finance costs for the company have reduced substantially and are expected to be further brought down in the coming years, thereby improving the profitability of the company substantially, it added.