Mumbai: Paced by its appliances, furniture and security equipment units, Godrej and Boyce Manufacturing Co. Ltd (G&B), the unlisted holding company of the Godrej group, is on course to improving its financial performance.

Graphic: Ahmed Raza Khan / Mint

Credit assessor Crisil Ltd has upgraded the company’s rating to AA-/Stable from A+/Stable, based on its belief that G&B’s financial risk profile will remain healthy over the medium term, supported by strong cash accruals.

In a 12 April report, Crisil said G&B, which has controlling stakes in the group’s flagship companies Godrej Industries Ltd and Godrej Consumer Products Ltd, had logged a net profit of Rs220 crore on revenue of Rs3,646 crore in the 11 months ended February. The profit was up from Rs88 crore in the corresponding period the previous fiscal.

“G&B has a healthy diversified revenue profile driven by earnings from leased income due to the large real estate asset base, dividend earnings from Godrej Industries and its own various group companies which gives it good financial flexibility," said Sudip Sural, head of Crisil Ratings, explaining the rationale behind the ratings upgrade.

G&B, which has also benefited from a stock market re-rating of its group firms, has interests in consumer goods, locks, furniture, appliances and security systems, with close to 70% of its revenue coming from consumer businesses.

The value of the company’s equity stakes in Godrej Industries and Godrej Consumer Products surged to Rs6,064 crore as on 28 February from Rs2,296 crore on 31 March 2009.

The performance in fiscal year 2009-10 was driven by a healthy performance by the appliances, furniture and security solutions divisions, Crisil said. This is in contrast with fiscal 2009, when the home appliances division was in the red.

The appliances division has benefited from lower raw material prices and excise duty benefits besides strong revenue growth as a result of an improved product mix and a revival in the economy, the report said

“The division recorded a revenue growth of 30% to end the fiscal 2010 at revenues of Rs1,700 crore," said Kamal Nandi, vice-president (sales and marketing), Godrej Appliances, which contributes a third of G&B’s revenue.

“During the slowdown we tightened our belts and increased our cost efficiencies to double our working capital cycle. This was achieved as we tightened our credit to our trade partners by 15 days and put in place a ‘lean operations business mode’," he added.

Jamshyd Godrej, chairman of Godrej group, could not be reached for comment as he is travelling overseas.

“The group surely has a tremendous upside," says Pankaj Jaju, senior vice-president, Enam Securities Pvt. Ltd, noting G&Bs strength as a furniture brand. “Now with the new tax structure the consumer durables sector once again stands to benefit as a lot of people get higher disposable incomes."

The move by the rating agency comes at a time when the group is planning to raise funds to expand its consumer goods business globally.

In fiscal 2006, its management set a target for group companies to double their business every three years.