India Ratings and Research stated that the rating reflects Trident’s healthy consolidated business profile, resilient operating performance, and healthy credit metrics, all of which the agency expects the company to sustain, despite the tariff-linked uncertainties.
With the completion of the capacity expansion programme, the company began deleveraging in line with India Ratings’ expectation and will continue to deleverage further with incremental EBITDA generation from the completed capex and the absence of major capex plans.
The rating is further supported by Trident’s sustainable margins in the paper segment despite a reduction in paper industry margins, which were impacted by an increase in raw material prices.
India Ratings expects the margins to remain at 12%-14%, with a likely stabilisation of margins in both textiles and paper segments as well as continued government support in the form of various fiscal incentives.
However, the rating remains constrained by high geographical and customer concentration, intense competition, raw material volatility, and forex risks.
The agency further said that a substantial increase in the scale of operations and profitability margins with the geographical and customer diversification coupled with a healthy ROCE while maintaining sound financial metrics with the consolidated net adjusted leverage reducing below 1.0x, all on a sustained basis, would be positive for the rating.
However, a large debt-funded capex or inorganic acquisitions, a decline in liquidity buffers and a significant reduction in sales and profitability, resulting in a drop in the ROCE and the consolidated net adjusted leverage exceeding 2.0x, all on a sustained basis, would be negative for the rating.
Trident manufactures cotton yarn, terry towels, bed linen and paper. It has three manufacturing facilities located in Dhaula and Sanghera (Punjab) and Budhni (Madhya Pradesh). The company also has a paper manufacturing capacity and a chemical manufacturing capacity for sulphuric acid.
The scrip had declined 2.48% to end at Rs 24.78 on the BSE yesterday.