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TRF surges over 100% in 6 sessions on higher profitability, robust order book

CARE Rating revised its outlook on the long-term rating of TRF from 'Negative' to 'Stable'

September 20, 2022 / 12:31 PM IST
Tata Group

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Shares of Tata group firm TRF Ltd surged over 100 percent in the last six consecutive sessions amid higher volumes with the stock hitting over six-year highs.

The stock scaled Rs 340.55 a share - a level last seen on July 12, 2016 - and hit the upper circuit for the sixth straight session and advanced 102 percent in this period. Since the start of August, it climbed 172 percent.

Credit rating firm CARE Rating recently revised its outlook on the long-term rating of TRF from 'negative' to 'stable' after TRF promoter Tata Steel invested Rs 165 crore in the company for its working capital requirements in June.

Tata Steel has acquired 16.5 crore, 12.17 percent (effective yield) non-cumulative, non-convertible, non-participating, redeemable preference shares (NCRPS) of face value Rs 10 each of the company," thereby investing Rs 165 crore, according to a BSE notification.

"The revision in outlook is on account of reduction in outside liability through the support of funds received from the parent Tata Steel Ltd (TSL). Furthermore, the company has recorded continuous decline in cash losses over the past two years and CARE envisages that the company is likely to turn marginally cash positive in FY23, largely on the back of order-book execution for TSL", Care rating said in its notification.

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The rally, according to analysts, was fostered by sustained increase in operating profitability and improvement in the order book position both from Tata Steel and other clients.

Around 75 percent of the order book of TRF comes from Tata Steel. As on July 1, TRF has an outstanding order book of Rs 363 crore with about 25 percent of the order coming from the external parties. The total operating income of the company increased by 25 percent year-on-year to Rs 147.94 crore in FY22, driven by an increase in service income to Rs 38.86 crore to Rs 20.86 crore a year ago.

TSL also supports TRF by infusing funds in the form of inter-corporate deposits and unsecured loans in case of any liquidity mismatch.

"As on March 31, capital structure of the company remains weak owing to the negative net worth base. The company has been reporting losses for the past three which led to the deterioration of net worth," CARE Ratings said.

Before this investment, Tata Steel as a promoter held a 34.11 percent equity stake in TRF, and also has 25 crore non-convertible redeemable preference shares and 2.5 crore, 11.25 percent optionally convertible redeemable preference shares (OCRPS) of the company.

Through the buying of NCRPS, Tata Steel will assist its associate company TRF in meeting its additional working capital requirements, repaying the whole or a part of the existing debts, and other general corporate purposes.

TRF is engaged in the business of designing & manufacturing the bulk material handling systems and equipment for core sector industries such as power, ports, steel, mining, and cement for projects undertaken on a Turnkey basis.
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