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India Ratings and Research issues stable rating to JK Tyres’ subsidiary Cavendish Industries

In 2016, New Delhi based JK Tyre and Industries acquired Cavendish from Kesoram Industries in a deal worth  ₹2195 crore (Bloomberg)Premium
In 2016, New Delhi based JK Tyre and Industries acquired Cavendish from Kesoram Industries in a deal worth 2195 crore (Bloomberg)

  • The assigned rating and the stable outlook reflect, Cavendish Industries' strong operating performance in FY21 on the strength of strong demand, the rating firm said
  • It said that Cavendish has also resorted to aggressive marketing through expansion of the dealer network in the current financial year

Credit ratings firm, India Ratings and Research on Thursday said that it has assigned a long-term issuer rating ‘IND A- / Stable’ to Cavendish Industries Limited, a subsidiary of JK Tyre and Industries Ltd, one the country’s largest tyre manufacturers.

As vehicle sales across segments improve in line with economic activity, tyre manufacturers are expected to report substantial recovery in their revenues and net profit in the coming quarters. Leading tyre manufacturers have already witnessed significant recovery in financial in the third quarter of FY 21 due to recovery in vehicle manufacturing and high demand in after market segment.

The assigned rating and the stable outlook reflect, Cavendish Industries Ltd’s strong operating performance in FY21 on the strength of strong demand from replacement markets, higher operating efficiencies, leaner cost structure and higher capacity utilisation, which has resulted in improved profitability, said the rating firm in a note.

It further added that Cavendish has also resorted to aggressive marketing through expansion of the dealer network in the current financial year to cater to high rural and suburb demand. “Ind-Ra further expects healthy double-digit growth in revenues on the back of robust replacement market demand on account of increased vehicle penetration in the country in FY22."

In 2016, New Delhi based JK Tyre and Industries acquired Cavendish from Kesoram Industries in a deal worth 2195 crore.

The rating agency further added that the acquisition of Cavendish Industries Ltd. (CIL) by JK Tyre in the year 2016 was strategic in nature and well considered decision to increase the manufacturing capacities at a much lower investment cost and also to enter two and three-wheeler tyre segments.

“CIL's presence is primarily in the domestic replacement market and has diverse product portfolio in the truck and bus (T&B) bias and radial tyres, two and three-wheeler tyres and non-truck bias tyre segments."

Last month India ratings upgraded the long-term issuer rating of JK Tyres and Industries to ‘IND A/Stable’ as a result of strong recovery in sales and financial performance reported by the company in the December quarter.

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