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India Ratings assigns ‘IND A1+’ rating to Syrma SGS; stock rallies 7%
Source: Business Standard
Syrma SGS Technology share price was up 3.77 per cent at Rs 456.85 per share on the BSE
At around 2:23 PM, Syrma SGS Technology share price was up 3.77 per cent at Rs 456.85 per share on the BSE. By comparison, the BSE Sensex traded 0.04 per cent higher at 84,945.10 around the same time.
“We wish to inform you that India Ratings and Research (Ind-Ra) has rated ‘IND A1+’ for the Rs 110 crore Commercial Paper Program of Syrma SGS Technology Limited,” the company said in its stock exchange filing.
A ‘IND A1+’ rating indicates a strong degree of safety for the timely payment of financial obligations.
In August, too, India Ratings and Research rated Syrma SGS Technology ‘IND A1+’ for the Rs 110-crore Commercial Paper Program.
According to India Ratings, Syrma SGS Technology has a strong presence in the original design manufacturing (ODM) market, which involves providing high-margin designing and engineering services.
While the revenue from ODM services increased in absolute amounts over FY21-FY23, the proportion of ODM as a percentage of the overall revenue declined 10-12 per cent over the period to about 20 per cent in FY23 and about 30 per cent in FY21.
“Ind-Ra believes Syrma SGS still has a reasonable presence in the ODM segment, higher than some of the industry peers. The management expects the proportion of ODM revenue to the total revenue to grow from the current levels over the medium term on account of some new engineering projects,” India Ratings had said in its ratings rationale.
Syrma SGS’ consolidated revenue grew at a CAGR of about 115 per cent to Rs 2,048.4 crore over FY21-FY23, supported by organic growth of about 60 per cent CAGR over FY21-FY23 for the standalone business; and an increase in revenue owing to acquisitions of SGS Tekniks Manufacturing and Perfect ID India in FY22.
These acquisitions have not only helped the company increase the scale in terms of revenue but also provided additional capabilities (increased product offerings and expansion in additional sectors) and opportunities of cross sell, thus supporting the overall revenue profile.
In the quarter that ended on June 30 2024 (Q1 FY25), the company reported a profit after tax (PAT) of Rs 20.3 crore as against Rs 28.32 crore. The revenue for the quarter under review stood at Rs 1,159.9 crore as against Rs 601.30 crore a year ago.
The total income for the quarter under review stood at Rs 1,175.17 crore, up from Rs 623.38 crore a year ago.
The earnings before interest, tax, depreciation, and amortisation (Ebitda) for the quarter stood at Rs 59.89 crore in the June 2024 quarter compared with Rs 59.02 crore in June 2023.
Syrma SGS earnings per share (EPS) in the June quarter decreased to Rs 1.09 in June 2024 from Rs 1.61 in June 2023.
“Ind-Ra believes a strong demand for the company’s products, favourable regulatory policies for expansion of such businesses/industry in India through various schemes such as Production-Linked Incentive Scheme and increased focus of the global original equipment manufacturers’ for shifting production and manufacturing to India will continue to support revenue growth in the short-to-medium term,” India Ratings said.
That said, any weakening of the business profile owing to a change in revenue composition and/or regulatory requirements, leading to a decline in the revenue and margin will be a key rating monitorable, it had said.
Syrma SGS Technology is a Chennai-based engineering and design company engaged in electronics manufacturing services (EMS). The company provides integrated services and solutions to original equipment manufacturers (OEMs) from the initial product concept stage to volume production through concept co-creation and product realization.
In the past one year, shares of Syrma SGS Technology have lost 19 per cent against BSE Sensex’s rise of 28.6 per cent.
First Published: Sep 25 2024 | 3:11 PM IST
