ICRA has upgraded the long-term rating in respect of Acknit Industries Ltd's banking facilities to [ICRA] BBB (pronounced ICRA triple B) from [ICRA] BBB- (pronounced ICRA triple B minus) and short-term rating to [ICRA] A3+ (pronounced ICRA A three plus) from [ICRA] A3 (pronounced ICRA A three). The outlook on the long-term rating is stable. Enclosed herewith the Rating Rationale issued by ICRA.
The upward revision in the ratings of Acknit Industries Limited (AIL) consider the sizeable increase in the scale of operations likely in the current fiscal, given the company has already posted a growth of 27% in 9M FY2022 on a YoY basis, which is likely to result in an improvement in overall profits as well as cash accrualsfrom business compared to the previous fiscal. The ratings also take into account the established market position of the company in the industrial safety product industry, and longstanding relationship with its clients, generating repeat orders and reflecting its acceptable product quality. The ratings also derive comfort from AIL's diverse and flexible product mix, which extend competitive advantage, and its diversified geographical presence.
The ratings are, however, constrained by the intense competition in the industry, coupled with AIL's low bargaining power with its established clients, which limits its pricing flexibility and exerts pressure on margins. The ratings are also impacted by the high working capital intensity of operations on the back of high receivables and inventory holding, which exerts pressure on its liquidity. Further, the ratings factor in the vulnerability of the company's profitability to fluctuations in the foreign currency exchange rates, although the same is mitigated to a considerable extent by a partial natural hedge and other formal hedging mechanisms adopted by the company. ICRA notes the sensitivity of AIL's profitability to any adverse changes in Government regulations, which could potentially impact the competitiveness of its products as well as business.
The Stable outlook on the [ICRA]BBB rating reflects ICRA's opinion that the company will be able to maintain its revenue growth, while maintaining the profitability levels, given its established position as well as vast experience of the promoter in the industrial safety products industry and the favourable demand outlook for the products.
Shares of ACKNIT INDUSTRIES LTD. was last trading in BSE at Rs. 131.40 as compared to the previous close of Rs. 133.50. The total number of shares traded during the day was 1616 in over 29 trades.
The stock hit an intraday high of Rs. 132.90 and intraday low of 130.00. The net turnover during the day was Rs. 212923.00.