Pricol soars 13%, hits all-time high on healthy business prospects

Shares of moved higher by 13 per cent to hit an all-time high of Rs 135.30 on the BSE in Thursday’s intra-day trade after rating agency ICRA reaffirmed ratings of instruments of the company with a stable outlook. The stock of the auto parts & components company surpassed its previous high of Rs 131.35 touched on December 31, 2021.

While announcing July-September quarter (Q2FY22) results on November 8, 2021, the management of said the company’s primary focus during these times has been to create a strong order book, higher operational efficiency and increase free cash flow.

“We continue to invest heavily in next-gen technology to keep increasing our product portfolio and sustain growth. We also continue to focus on debt reduction towards achieving a goal of being long term debt free over the next few quarters,” the management had said.

ICRA said that the reaffirmation in ratings takes into account Pricol’s (erstwhile Pune Limited) (Pricol/the company) strong revenue and margin growth in FY2021 and H1 FY2022, anticipated healthy business prospects over the medium term and comfortable debt metric.

In FY2021 and H1 FY2022, Pricol’s revenues benefitted from deeper penetration across various auto sub-segments following improved wallet share in Driver Information Systems (DIS), introduction of new products like the fuel pump module from April 2020 and re-entry into the PV segment in FY2021 following expiry of a non-compete clause with an erstwhile JV partner.

The company’s revenues are exposed to segment concentration risks with majority of revenues from the 2W segment. However, increase in wallet share and new customer additions in the CV/PV segment both domestically and overseas, mitigates the risk to a large extent. Pricol also has an early-mover advantage in electric vehicles (EVs), and this is likely to benefit the company both in terms of realizations and volumes, as EVs penetration increases.

While there could be some headwinds because of the ongoing semiconductor shortage and commodity price inflation, ability to pass on price hike to the OEMs (albeit with a lag of three to six months) and structural cost reduction undertaken are likely to result in healthy margins. With anticipated healthy accruals and no debt-funded capex plans in FY2022 and FY2023, ICRA expects Pricol’s consolidated coverage metrics to remain healthy over the medium term.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Leave a Reply

Your email address will not be published. Required fields are marked *