The rating affirmation reflects the likely recovery in TCL's consolidated revenue and profitability from the trough during the pandemic fallout in the fiscal year ending March 2021. We expect the recovery to sustain over the upcoming 12 to 18 months, strengthening TCL's debt/EBITDA leverage to comfortably below 4.5x and EBITA margin towards 20%, says Kaustubh Chaubal a Moody's Vice President and Senior Credit Officer.
The stable outlook reflects Moody's view that TCL will sustain revenue growth across all its businesses, while maintaining its leading position in the global soda ash industry. In addition, the stable outlook continues to reflect Moody's expectation that TCL will retain its measured approach to growth and that it will prudently deploy its cash surplus in new EBITDA-accretive investments.
Moody's said that TCL's Ba1 CFR continues to reflect the company's leading position in the global soda ash markets and its competitive cost structure. This underpins its sustained strong profitability, which will lead to better leverage and coverage metrics. TCL's very good liquidity is also an underlying strength.
The rating also reflects TCL's relatively small scale when compared with that of its global chemical industry peers, as well as its exposure to the inherent cyclicality in end-user markets.
The Ba1 CFR continues to incorporate a one-notch uplift given Moody's expectation of timely, ongoing and extraordinary support from its parent, Tata Sons, should the need arise.
Earlier this week, the credit ratings agency CRISIL reaffirmed its rating on the commercial paper (CP) of Tata Chemicals at 'CRISIL A1+'.
TCL manufactures soda ash and related chemicals, including sodium bicarbonate, caustic soda and bromides. The company's subsidiary, Rallis, is one of the leading players in the domestic crop protection sector, and manufactures pesticides, herbicides and fungicides.
The company reported 85% drop in consolidated net profit to Rs 29 crore on a 11% rise in income from operations to Rs 2,636 crore in Q4 FY21 over Q4 FY20.
The scrip rose 0.15% to end at Rs 749.15 on the BSE.
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