RACL Geartech said that CARE Ratings has reaffirmed the company's long-term rating at 'CARE A-' with 'stable' outlook.
The agency has also affirmed the companys short-term rating at 'CARE A2+.
CARE Ratings stated that the ratings assigned to the bank facilities of RACL Geartech continue to derive strength from experienced promoters along with their long track record of operations, established player in the transmission gears and shafts for automotive applications along with the reputed customer base including some of the luxury/premium global OEMs, and geographically diversified revenue mix.
Further, ratings also take comfort from comfortable operational performance with growing scale of operations during FY24 (refers to period from April 01, 2023 to March 31, 2024) and healthy profitability margins due to favourable geographic mix.
However, the ratings remain constrained due to moderate financial risk profile owing to the discretionary capex undertaken by the company each year based on the nomination letters received from the global OEMs, raw material price volatility risk along with the presence of foreign exchange fluctuation risk, working capital intensive nature of operations along with cyclical nature of the automotive industry.
Factors like sustained improvement in the scale of operations beyond Rs.450 crores while maintaining the profitability margins and continued relationship with its key customers and an improvement in the capital structure leading to overall gearing of below 0.75x could lead to a ratings upgrade.
However, a decline in scale of operations below Rs 225 crore with moderation in PBILDT margin below 18% on a sustained basis and higher than envisaged capex thereby with increase in debt leading to total debt to PBILDT beyond the current levels could lead to a ratings downgrade.
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RACL Geartech is engaged in the business of manufacturing of transmission gears and shafts for automotive and industrial applications. The company has two manufacturing units in Uttar Pradesh at Gajraula and Noida.
The scrip fell 1.31% to currently trade at Rs 958.65 on the BSE.
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