Samvardhana Motherson gains 4% on Moody's rating upgrade; Outlook 'stable'

Shares of Samvardhana Motherson International (SAMIL) soared 4.4 per cent at Rs 163.55 per share on the BSE in Monday’s intraday trade. The auto components manufacturer's stock price jumped after Moody's Rating upgraded the credit rating of SAMIL and Samvardhana Motherson Automotive Systems Group B.V (SMRP B.V), a wholly owned subsidiary of SAMIL. 

The long term rating for both the companies has been upgraded from Ba1 (under review for upgrade) to Baa3 (Outlook Stable).

On Saturday, the company announced in an exchange filing that the ratings action is based on the sound financial strategy, risk management, stronger financial metrics, and well executed acquisitions. 

"The upgrade to investment grade reflects the continued improvement in SAMIL's credit profile due to the sustained strengthening in its financial metrics as well as its improved scale, diversification, scope and profitability following the integration of several acquisitions," said Kaustubh Chaubal, a Moody's Senior Vice President.

The global rating agency said that the full-year operations of the recently acquired businesses will support SAMIL's revenue growth of around 20 per cent for the fiscal year ending 31 March 2025 (FY24-25), even as Moody's forecasts global light vehicle unit sales to climb slower at around 2.0 per cent during 2024 and 2025. 

Moreover, the acquired businesses' higher profitability should enable the company's EBITA margin to inch up towards 7 per cent in fiscal 2026.

Furthermore, the rating agency noted that SAMIL had cash and liquid investments of $840 million as of March 2024 and will likely generate cash flow from operations of $1.3 billion over the 18 months until September 2025.

In the fourth quarter of fiscal year 2023-24, SAMIL recorded a net profit growth of 110 per cent year-on-year (YoY) at Rs 1,372 crore. Revenue also experienced a substantial increase of 20 per cent, reaching Rs 27,058 crore compared to the year-ago period.

At 01:30 PM; the stock of the company was trading 4.09 per cent lower at Rs 163.05 per share. In comparison the BSE Sensex was up marginally by 0.07 per cent.