Infomerics Ratings reaffirms ratings of HFCL; maintains 'stable' outlook

HFCL said that Infomerics Ratings has reaffirmed its rating on the credit facilities of the company worth Rs 2,312.62 crore.

The agency has reaffirmed the company's long-term rating at IVR A/ Stable and the short-term rating at IVR A1.

Infomerics Ratings said that the rating reaffirmed to the bank facilities of HFCL continues to derive comfort from established track record of group & experienced promoters, satisfactory order book position with reputed clientele, comfortable financial risk profile with healthy debt coverage indicators and strong demand potential for telecom products, optic fiber cables industry.

However, these rating strengths remain constrained by working capital intensive operations, customer concentration risk and exposure to intense competition.

It further added that factors like significant and sustainable improvement in operating performance and profitability margin and improvement in operating cycle with improvement in the average collection period on a sustained basis could lead to a rating upgrade.

However, factors like further deterioration in operating cycle either by further increase in inventory holding period or collection period and substantial decline in profitability impacting debt protection matrix and liquidity could negatively impact the company's rating.

HFCL is engaged in the business of manufacturing of optical fiber (OF), optical fiber cables (OFC), cable accessories and high - end telecom transmission and access equipment and specializes in providing turnkey solution to telecom service providers, railways, defence, smart city & surveillance projects.

The company's consolidated net profit rose 0.33% to Rs 81.86 crore on a 4.58% increase in sales to Rs 1173.47 crore in Q2 FY23 over Q2 FY22.

The scrip rose 0.51% to currently trade at Rs 79.55 on the BSE.

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