Ind-Ra assigns BBB / Stable rating to Modern Insulators' fund-based working capital limits

India Ratings and Research Pvt. Ltd. (Ind-Ra) on May 18 has assigned its ratings to Modern Insulators Limited (MIL). The credit rating agency assigned IND BBB / Stable rating on fund-based working capital limits (Rs136.06cr).

The rating on non-fund-based working capital limits (Rs60cr) of the company was assigned IND A3+.

The company said key rating drivers included

Improvement in EBITDA Margin in FY21: MIL recorded margins of 7.5%-8.5% over FY17-FY20. Ind-Ra believes MIL will sustain its higher margins over the medium term, backed by energy savings and cost-cutting initiatives.

Comfortable Credit Metrics: Ind-Ra expects the credit metrics to have improved on a yoy basis in FY21 because of the rise in the margins.

Liquidity Indicator - Adequate: MIL’s average utilisation of the fund-based limits was 60% over the 12 months ending March 2021.

Medium Scale of Operations; Low Customer Concentration Risk: MIL’s revenue dipped to Rs4,397 million in FY20 (FY19: INR4,400 million) owing to lower volume sales of insulators due to a fall in demand from equipment manufacturers.