ICRA Reaffirms Ratings for Wheels India Limited

Strategic Insights -

ICRA has reaffirmed the long-term rating of [ICRA]A (pronounced ICRA A) and the short-term rating of [ICRA]A1 (pronounced ICRA A one) outstanding on the term loans, fund-based facilities, and non-fund-based facilities of Wheels India Limited. The ratings reflect the company's leading market position in the domestic wheel rim industry, established operations in the global earthmoving (EM) wheel rim industry, and well-diversified product and customer mix. These strengths have enabled the company to report relatively stable performance in recent years, despite the sluggish economic environment.

The ratings also consider the company's continued diversification into segments such as air suspension systems, windmill, and power structures, which cater to both the commercial vehicles (CV) and the capital goods industry. The management's efforts to grow its nascent replacement business and greater focus in the aluminum wheels and exports segment are expected to aid the company in diversifying its revenue base further. However, the revenues from these segments have grown steadily, and overall growth for WIL would continue to be driven by the traditional domestic auto sector, which is witnessing gradual recovery in recent months.

Key Takeaways:

  • ICRA has reaffirmed the long-term rating of [ICRA]A (pronounced ICRA A) outstanding on the Rs. 116.27 crore term loans, Rs. 225.00 crore fund-based facilities, and Rs. 50.00 crore unallocated facilities of Wheels India Limited.
  • The ratings reflect the company's leading market position in the domestic wheel rim industry, established operations in the global earthmoving (EM) wheel rim industry, and well-diversified product and customer mix.
  • The company has continued to diversify into segments such as air suspension systems, windmill, and power structures, which cater to both the commercial vehicles (CV) and the capital goods industry.
  • WIL's thin operating profit margins owing to the commoditized nature of its product, exposure to exchange rate fluctuations, and capital-intensive nature of business impact the company's overall profitability of operations.
  • Ability of the company to grow the higher-margin new business segments would be key towards improving the business and financial risk profile.
  • The combined stake of the promoters (Titan and TVS group) has been pared down to 75% as on March 31, 2014.

Statistics:

  • Rs. 116.27 crore term loans with [ICRA]A rating
  • Rs. 225.00 crore fund-based facilities with [ICRA]A rating
  • Rs. 50.00 crore unallocated facilities with [ICRA]A rating
  • Rs. 30.29 crore unallocated limits with [ICRA]A or [ICRA]A1 rating
  • 75% promoter stake as on March 31, 2014
  • Rs. 17.3 crores net profits on an operating income of Rs. 1,003.9 crores for the six months ended September 30, 2014
  • Rs. 28.4 crore net profit on an operating income of Rs. 1,823.2 crore for the financial year 2013-14

Sources:

  • ICRA Limited (www.icra.in)
  • Wheels India Limited (Company Profile)
  • December 2014 Newsletter (ICRA Limited)