ICRA revises outlook on Dixon Tech's long term rating to 'Positive'

Credit ratings agency ICRA has reaffirmed its ratings and changed the outlook on the long-term rating of Dixon Technologies (India) (DTIL) from Stable to Positive.

ICRA reaffirmed DTIL's loan term rating at '[ICRA] A+', while revising outlook from 'Stable' to 'Positive'. The credit ratings agency also reaffirmed the company's short term and commercial paper ratings at '[ICRA] A1+'.

ICRA said that the revision in outlook to 'Positive' takes into account the scaling up of DTIL's operating income as well as improvement in its profitability and working capital position over the past year.

Despite the disruption in operations due to the Covid-19 pandemic-related lockdown, the performance of DTIL has remained satisfactory in Q1 FY2021 and it has witnessed strong recovery in business post easing of Covid-19-related curbs.

The 'Positive' outlook on the long-term rating stems from ICRA's expectation that DTIL would continue to scale up its operations and profits along with increasing client and product diversification.

The scale-up could be significant if the company's application for Production Linked Incentive (PLI) scheme is approved. This is expected to help the company in sustaining and further improving its credit metrics over the medium term.

While reaffirming the rating, ICRA has noted the uncertain Covid-19 pandemic situation that could impact corporates including DTIL in short term.

"Any re-imposition of localised lockdown/shutdown of production/supply disruption to contain the pandemic could impact its operating performance and will remain a sensitivity. Any significant supply-chain disruption could create pressure on the credit profile of DTIL and therefore, would be a key," the ratings agency said.

Dixon Technologies is a design-focused products and solutions company. The firm engages in manufacturing products in the consumer durables, lighting and mobile phones markets in India.

DTIL's consolidated net profit slumped 93.2% to Rs 1.60 crore on a 54.9% decline in net sales to Rs 516.94 crore in Q1 FY21 over Q1 FY20.

The scrip shed 0.80% to currently trade at Rs 9011 amid profit taking. The stock gained 7.7% in the past three sessions while the benchmark S&P BSE Sensex rose 3.9% during the same period.

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