India Ratings Affirms AYM Syntex At ‘IND A’/Stable; Off RWN

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India Ratings and Research (Ind-Ra) has affirmed AYM Syntex Limited’s (AYM) Long-Term Issuer Rating at ‘IND A’ with a Stable Outlook, while resolving the Rating Watch Negative (RWN).

The instrument-wise rating actions

The RWN resolution reflects an improvement in AYM’s short-term liquidity position, which led to a recovery in demand over 2HFY21, resulting in stronger-than-expected operational cash flows in FY21; the sanction of additional working capital limits and the availment of low-cost debt facilities with elongated maturity profile, easing the repayment pressure. The higher operating cash flows in FY21 were a result of i) higher share of value-added products and exports ii) cost-cutting initiatives, iii) higher spreads on key products and iv) inventory gains.

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Recovery in operational performance
AYM logged revenue of Rs 9,474 million in FY21 (FY20: Rs 10,280 million) and EBITDA of Rs 913.6 million (Rs 943 million). The company EBITDA’s turned negative to Rs 59.8 million in 1QFY21 (4QFY21: Rs 419 million; 3QFY21: Rs 349 million; 2QFY21: Rs 206 million; FY20: Rs 943 million; FY19: Rs 716 million). The improvement in quarterly performance over FY21 can be attributed to demand recovery, both in the domestic and export market, and an increased share of value-added products including bulk continuous filament (BCF) yarn and heat set yarn, within the overall product mix, and higher crude oil prices resulting in inventory gains. Ind-Ra believes export demand is likely to be strong, although with challenges on the availability of containers and increased shipping and freight costs.

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Plant utilisations have witnessed quarterly improvement over FY21, within each business segment, led by an increase in the capacity utilisation and efficiency levels. Ind-Ra expects the company’s FY22 sales volumes to grow around 15% yoy, due to the low base effect of FY21 (due to COVID-19 impacting 1QFY21 volumes) and an improved throughput.

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AYM’s sales book is largely order backed and the management has articulated that it typically maintains a two-to-three month order book in strategic segments, thereby providing near-term revenue visibility.

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