JK Tyre Earns Top Rating: CARE Ratings Upgrades to 'CARE A+'

JK Tyre and Industries Limited's rating upgrade to 'CARE A+' by CARE Ratings is a significant milestone for the company and the Indian tire industry as a whole. The upgraded rating positions the company for continued growth and success in the competitive global tyre market.

In a significant development, JK Tyre and Industries Limited, one of India's leading tire manufacturers, has received a credit rating upgrade from CARE Ratings. The company's rating has been raised to 'CARE A+' from its previous 'CARE A' rating, reflecting the company's strong financial performance and improved creditworthiness.

The rating takes into account the company's improved operational and financial performances in FY23, as evidenced by increased scale of operations, improved working capital management, and improved leverage and coverage indicators, which are likely to continue in the future.

During FY23, consolidated revenue increased by 23%, resulting in a compounded annual growth rate (CAGR) of 10% over the previous 6 years.

The moderation in the raw material mix, as well as the company's focus on increasing the share of premium SKUs in the sales mix, increasing the share of the passenger vehicle market, and improving scale and capacity utilization, are likely to aid in the company's profitability in FY24.

CARE Ratings, one of India's premier credit rating agencies, cited several factors that contributed to JK Tyre's improved rating. The agency noted that JK Tyre has demonstrated robust operational and financial performance, with consistent revenue growth and profitability in recent years. The company's ability to manage its debt effectively and maintain a healthy liquidity position was also highlighted as a key factor in the rating upgrade.

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The upgrade to 'CARE A+' is a testament to JK Tyre's commitment to excellence in its operations and financial management. It reflects the tire manufacturer's ability to weather challenging market conditions and emerge as a financially stable and dependable entity in the automotive industry.

CARE has also raised the outlook of Cavendish Industries Limited, a subsidiary of JK Tyre, to 'stable' from 'negative'. As projected truck and bus radial (TBR) and passenger car radial (PCR) capacity is finished by March 31, 2024, or early Q1FY25, debt levels are predicted to peak in FY24.

The ratings take into account its strong position in the domestic tyre business, which is distinguished by its established market position in the TBR segment, presence across all user categories, and broad marketing and distribution network. According to CARE Ratings, sustained passenger vehicle demand would drive volume growth in FY24, followed by commercial vehicles and 2/3-wheelers.

However, the ratings are hampered by raw material price volatility, susceptibility to foreign currency fluctuation concerns, and the industry's competitive nature. Any cost overruns in JKTI's announced capacity expansion plans, delays in realizing the expected benefits, and/or a sharp rise in raw material prices, increase in imports of Chinese tyres, and slower-than-expected deleveraging could all lead to a deterioration in credit metrics, which remains a key monitorable.

In conclusion, JK Tyre and Industries Limited's rating upgrade to 'CARE A+' by CARE Ratings is a significant milestone for the company and the Indian tire industry as a whole. It highlights JK Tyre's financial strength, operational excellence, and commitment to delivering high-quality products to its customers. The upgraded rating positions the company for continued growth and success in the competitive global tire market.