Share of Godrej Consumer Products Limited (GSPL) rose 4 per cent to hit an intraday high of Rs 907.95 on BSE after rating agency ICRA upgraded its long-term rating to AAA (Stable) from AA+ (Stable) while reaffirming its short-term rating of A1+.
Corporates with the AAA rating are considered to have the highest degree of safety, with regard to the timely servicing of financial obligations; thus carrying the lowest credit risk.
The stock opened 1.26 per cent higher at Rs 879.90 against the previous close of Rs 869.45 on BSE. Market cap of the firm rose to Rs 90,571.83 crore.
The FMCG major has gained 29 per cent in the last one year and risen 19.5 per cent since the beginning of this year. The share stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200 day moving averages.
The Stable outlook reflects ICRA’s expectations that GCPL will continue to benefit from its established position in the domestic as well as international FMCG markets, resulting in healthy cash accruals leading to maintenance of strong debt protection metrics and capital structure.
Over the medium term, GCPL’s leverage is likely to remain low and its liquidity is likely to remain strong with on-balance sheet liquidity of over Rs. 1,000 crore on a steady state basis.
“The long-term rating upgrade reflects ICRA’s expectation that the financial and operational risk profile of Godrej Consumer Products Limited (GCPL) will remain strong, going forward, driven by its established market position in the fast-moving consumer goods (FMCG) industry in the categories in which it is present, its well-diversified product segments and geographical presence,” the rating agency said.
ICRA noted that GCPL has a consistent track record of introducing new products to cater to shifting consumer preferences and expects that going forward, its revenue growth will be driven by stable demand growth and introduction of new products across geographies.
The rating agency expects the operating margin to improve and stabilise for GCPL’s international operations on a long-term basis because of expected scaling up of operations and cost control measures being undertaken by the management.
“GCPL’s liquidity position is strong, supported by cash and bank balances and liquid investments of over Rs 1,200 crore and domestic bank lines of nearly Rs. 700 crore, which has been sparingly utilized (apart from CP limits available and bank lines of Rs 750 crore in international operations), along with healthy accruals from the business should help it to maintain strong liquidity,” it noted.
“GCPL’s continued strong performance, robust capital structure, well diversified portfolio of products and geographies with strong brands in market leadership positions, etc. reflect the resiliency of our business model, the high relevance we have to our customers’ most important objectives and our team’s ability to execute in a challenging environment,” said V Srinivasan, Company Secretary and Chief Financial Officer, GCPL.
