The rating company ICRA has withdrawn the “A1 Plus” rating assigned to the tractor manufacturer Escorts Ltd Commercial Paper Program (CCP) and upgraded the rating for the short-term debt securities, over which the company was aiming to increase, to “A one plus” £200 crore. The decision was made taking into account the solid financial condition of the company and the adequate liquidity reserves in the balance sheet.
“The ratings outstanding for the company’s bank facilities continue to take into account Escort’s healthy financial risk profile, with the company being virtually debt-free and having significant unencumbered cash and cash equivalents ( £2,580 crore as of September 30, 2021), “the rating agency said in a note.
In addition, Escorts has been able to record sustained healthy operational performance in all business areas in recent years, which has led to strong cash reserves. A continuation of the strong operating performance in the current fiscal year despite the adverse effects of the lockdowns following the spread of Covid-19 coupled with receiving funds after the preferential issue closed, resulted in a further improvement in unencumbered cash and liquid assets.
“The company proposed withdrawing the rating as there is no outstanding balance on the instrument being rated. With the company having sufficient cash balances and investments on its books, management does not plan to borrow through the CP program for the foreseeable future,” said Escorts in a separate statement.
Since the start of economic development in May, Escorts tractor sales have increased due to the robust recovery of the rural economy due to good harvests and limited cases of Covid. As a result, the company was initially unable to meet demand as the supply chain was interrupted due to the lockdown measures.
“ICRA is consoling itself in the strong recovery in sentiment on farms following the relaxation of the lockdown measures, which has resulted in robust volume growth for the agricultural machinery division (83% of sales in 9M FY2021). Supported by the expectation that the mood on the farm will continue, led by a healthy outlook for the Rabi harvest, the Agricultural Equipment division should see sales growth in the current financial year, “added ICRA in the above note.
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