CRISIL reaffirms rating of Amber Enterprises India Limited, revises outlook to positive

CRISIL has revised its outlook on the long-term bank facilities of Amber Enterprises India Ltd (Amber; part of the Amber group) from 'Stable' to 'Positive' while reaffirming rating at 'CRISIL A+'. The short term rating has been reaffirmed at 'CRISIL A1'.

The revision in outlook reflects significant improvement anticipated in business risk profile because of few favourable changes in the domestic air-conditioning (AC) manufacturing ecosystem.

In October, 2020 Government of India (GoI) revised its policy on import of ACs with refrigerants. Earlier brands could freely import ACs with refrigerants whereas as per the revised policy, the import is prohibited. Since the ban is effective immediately and orders for next summer start from month of December onwards, hence group is well poised to take benefit of this new opportunity. This is reflected in group signing 4 new customers since the announcement of ban on imports.

Further, GoI has also recently announced production-linked incentive (PLI) scheme for white goods sector (ACs and LED) recently with incentives of Rs 6238 crore. The group with market share of 24% in room AC market is well poised to benefit from the implementation of the scheme which will not only improve domestic manufacturing in the medium term but also improve cost competitiveness in the export market in the medium to long term. The overall business risk profile will thus be a key monitorable over the medium term.

The revision in outlook also factors in the impact of Covid-19 on the AC industry in fiscal 2020 as an entire summer season was lost. Group registered revenue of Rs 667.4 crore in H1 FY21, decline of 68.3% from Rs 2103.6 crore in H1 FY20. Profit after tax was also down to negative Rs 21.08 crore in H1 FY21 compared to positive Rs 87.6 crore in H1 FY20. Despite decline in revenue and profit, strong financial risk profile aided by recent Qualified Institutional Placement (QIP) of Rs 400 crore supported the overall credit risk profile of the group.

The ratings continue to reflect the Amber group's established market position as a vendor for leading air conditioner (AC) manufacturers, the group's diversified customer base, high operating efficiency, and strong financial risk profile. These strengths are partially offset by exposure to risks related to seasonal business and the group's large working capital requirement.

Shares of Amber Enterprises India Ltd was last trading in BSE at Rs.2284.5 as compared to the previous close of Rs. 2324.95. The total number of shares traded during the day was 3328 in over 735 trades.

The stock hit an intraday high of Rs. 2341.95 and intraday low of 2281.75. The net turnover during the day was Rs. 7635977.

Source : Equity Bulls

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