Welspun India spurts 10% on rating upgrades by India Ratings

Shares of Welspun India (WIL) advanced 10 per cent to Rs 84.65 on the BSE in intra-day trade on Friday after rating agency India Ratings & Research, a Fitch Group firm, upgraded the long-term credit rating of the company from IND AA- to IND AA with a stable outlook. The stock of the textiles company was trading close to its 52-week high of Rs 87.60 touched on March 15.

The upgrade reflects WIL’s better-than-Ind-Ra-expected balance sheet deleveraging through a strong operational performance including capacity utilisations, sales and operating margins post the unlocking of economic activities, as well as, improved working capital management.

The agency expects the deleveraging to continue along with strengthening of its business profile through emerging business and de-concentration of its home textiles segment, which could aid in combatting the inherent cyclical volatility in the home textiles business. Furthermore, a low balance sheet leverage is likely to provide headroom towards foraying and spending on growth areas, it said.

With the emergence of the homebody economy, there is a visible structural shift in consumers’ spending for home products. In October-December (Q3FY21) quarter, the company delivered a solid performance despite a seasonally weak quarter, clocking its highest ever quarterly revenue in the history of the company.

With increased focus on innovation, ESG and fast-growing e-commerce channel, the management while announcing Q3 results on January 27 said it will continue to advance the company’s operating models to the rapidly changing business landscape while increasing capacities to cater to the growing demand.

WIL is the largest home textiles company in Asia and among the top two textile companies worldwide. The company has been India’s largest exporter of home textile products and exports to 17 of the top 30 global retailers, thus lowering the counterparty risk. WIL has a healthy scale of operations and a diversified product mix comprising terry towels, bed linen. Furthermore, WIL’s environmental, social and governance risks being categorised as low reflects a healthy and sustainable business profile.