Crisil Ratings stated that the rating reaffirmation reflects the strong uptick in business risk profile primarily in the aluminium segment improving its overall revenues and also expectations that CAL’s operating profitability will continuously witness improvement over the near to medium term, due to better operating leverage, product mix as well as better contribution from its subsidiary, Sunbeam Lightweighting Solutions (SLSPL), resulting in healthy annual accruals.

CAL’s financial risk profile though is expected to witness a temporary moderation in the current fiscal on account of sizeable capital spending, which will involve material debt addition, impacting debt metrics.

However, should the company be able to successfully monetize land at SLSPL’s Gurgaon facility, debt levels and debt metrics are expected to be at more comfortable levels.

Besides, moderation in capital spending and healthy annual cash generation, along with planned repayment of debt will enable a gradual improvement in debt metrics over the medium term.

The ratings continue to reflect the strong position of CAL in the auto-engineering contract-manufacturing sector, established diversified customer relationships, healthy operating margin and its adequate financial risk profile.

These strengths are partially offset by large working capital requirement and capital-intensive operations and part vulnerability of performance to slowdown in the automotive sector.

Craftsman Automation manufactures several components and sub-assemblies on supply and job-work basis according to client specifications in the auto, industrial and engineering segments. The company’s key products in the auto segment include power train products, cylinder blocks, cylinder heads, cam shafts and crank cases for CVs, sports utility vehicles, two-wheelers, farm equipment and earthmoving and construction equipment.

The scrip rose 0.34% to currently trade at Rs 7046.90 on the BSE.