Dhoot Transmission surges after Crisil Ratings upgrades LT ratings to 'AA'

The agency has reaffirmed its 'Crisil A1+' rating on the short-term bank facility.

Crisil Ratings stated that the upgrade in the ratings reflects Crisil Ratings expectations that the group?s business and financial risk profile will continue to improve driven by strong growth in scale of operations, sustained healthy operating profitability and substantial strengthening of capital structure and liquidity.

Over the years, the group has maintained steady growth in its scale of operations and is expected to sustain this growth in the current fiscal and over the medium term. This is supported by the group's established market position in the automotive component industry, long-standing relationships with marquee domestic and global OEMs (Original equipment manufacturers), healthy order visibility, and recurring business from existing customers.

The growth has also benefited from the gradual ramp-up of capacities commissioned over the past few years, resulting in improved utilisation levels and operating leverage benefits. Further, with the IPO proceeds which will partly be used for future capital expenditure (capex)/investments will support the growth in scale of operations over the medium term.

Despite ongoing investments towards capacity augmentation, technology upgrades, and product diversification, the group's operating margins has remained healthy at over 15% and is likely to remain in similar range over the medium term supported by its integrated manufacturing operations, diversified product portfolio, and benefits from economies of scale.

The group's financial risk profile has witnessed a significant improvement following the successful equity infusion through IPO and investment from Bain Capital, which has significantly strengthened its net worth and enhanced financial flexibility.

Liquidity is expected to remain strong, supported by strong consolidated cash accruals, sizeable cash and bank balance and moderate utilization of working capital bank limits.

These rating strengths are partially offset by the susceptibility of its operations to cyclicality in the automotive industry and customer concentration in revenues.

Dhoot Transmission is a leading manufacturer of automotive electrical and electronic components, including wiring harnesses, electronic sensors, controllers, switches, battery packs and interconnects, terminals, connectors, junction boxes, power distribution units, EV charging solutions and data cables for both internal combustion engine (ICE) and electric vehicles (EVs). DTL caters primarily to the automotive industry, serving two-wheelers, three-wheelers, passenger vehicles, commercial vehicles, farm equipment and off-highway vehicles.

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