CRISIL said that during During fiscal 2023, TCL's consolidated revenue grew 33% supported by higher realisations across geographies, while volumes remained flat. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin expanded by 420 basis points (bps) as the increase in realisation was higher than rise in cost of production owing to favourable demand-supply scenario.
Realisation is expected to decline in fiscal 2024 owing to moderation in input prices, while volumes are expected to increase on the back of favourable demand outlook, especially from the glass sector. At the same time, global supply situation remains tight with no significant capacity addition expected in the near term.
Among international businesses, the operations in the US and UK reported revenue growth of 43% and 35%, respectively, in fiscal 2023 due to sharp increase in realisations, while EBITDA margin improved by more than 270 bps and 1,700 bps, respectively.
Margin is expected to improve further in the US business with newer annual contracts starting to take effect for calendar year 2023, as seen in the fourth quarter of fiscal 2023. Similarly, in the UK operations, the benefit of moving to fixed-margin contract is expected to accrue from fiscal 2024 onwards. The Kenya operations also continued to improve with 64% growth in operating income and improvement in Ebitda margin by 2,470 bps, enabling it to become debt-free in fiscal 2023.
The standalone business of TCL remains debt free, while majority of the debt resides in the international businesses. Overall, gross debt (including lease liabilities) stood at Rs 6,296 crore as on 31 March 2023, against Rs 7,024 crore as on 31 March 2022.
The company prepaid debt in 2023 as cash accrual improved and is expected to continue the same with incremental accruals to be utilized towards repayment of debt in UK and US businesses.
Financial flexibility remains strong by virtue of a being part of the Tata group. Liquidity is also cushioned by cash and equivalent of Rs 1,935 crore as on 31 March 2023, and quoted equity investment in other Tata group companies valued at around Rs 4,400 crore as on 23 May 2023.
The rating continues to reflect the strong business risk profile of TCL, driven by its established market presence in diversified markets, and healthy financial risk profile because of strong liquidity and financial flexibility. These strengths are partially offset by susceptibility to price volatility in the soda ash business.
Tata Chemicals manufactures soda ash and related chemicals, including sodium bicarbonate, caustic soda and bromides.
The company reported 47.66% jump in consolidated net profit (from continuing operations) to Rs 694 crore in Q4 FY23 as against Rs 470 crore in Q4 FY22. Revenue from operations grew by 26.6% year on year to Rs 4,407 crore in the quarter ended 31 March 2023.
The scrip rose 0.09% to end at Rs 969.80 on the BSE on Friday.
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