The agency has affirmed the company's short-term rating at '[ICRA] A2+'.
ICRA said that the upgrade in long-term rating outstanding on the fixed deposits and bank facilities of Wheels India (WIL) considers the expected improvement in its overall credit profile over the near to medium term.
WIL's operating profit margins improved to 7.0% in H1 FY2025, aided by price corrections, increase in proportion of margin-accretive products and cost optimisation measures such as efficiencies in procurement and production, fixed cost controls among others.
This resulted in an improvement in debt metrics and interest coverage metrics compared to past levels. The margins are expected to improve going forward aided by supported by periodic price negotiations with customers, continued focus on cost optimisation, improvement of proportion of exports and better operating leverage.
The ratings remain supported by WIL's exceptional financial flexibility arising from its parentage. The company belongs to the T S Santhanam faction (TSF) of the larger TVS Group of Companies 'an established name in the domestic auto ancillary industry.
The ratings, however, remain constrained by the company's moderate debt metrics and moderate operating margins, albeit improvement in H1 FY2025.
Further, the company reported a YoY decline in consolidated operating income in H1 FY2025 to Rs. 2,342.4 crore impacted by demand slowdown in overseas markets.
The slowdown in new vehicle registrations in FY2025 could result in some moderation in revenues for WIL in the near term. Its revenues are also exposed the inherent cyclicality of the domestic auto industry.
Nevertheless, the company's established relationship with its customers, healthy order book, new customer additions, and increase in share of business with existing customers as part of vendor diversification initiatives by global OEMs mitigate the revenue risk to an extent and are likely to support healthy medium-term revenue prospects.
Wheels India (WIL) is among the largest manufacturers of steel wheel rims in the country and is present across automotive (except 2W), tractor and earthmover segments. Further, WIL also manufactures air suspension systems for luxury buses in India, supplies fabricated and machined parts for windmills, and produces bogie frame and bogie bolsters for Indian Railways.
The scrip fell 2.94% to currently trade at Rs 666.10 on the BSE.
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