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Last Updated : Apr 09, 2020 02:30 PM IST | Source: Moneycontrol.com

M&M shares surge 10% after CRISIL reaffirms rating

M&M in its BSE filing on April 9 said CRISIL has reaffirmed its long term rating at AAA/Stable and short term rating at A1+ for company's bank facilities.

 
 
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Mahindra and Mahindra share price has gained for the fourth consecutive session, rising 10 percent intraday on April 9 after CRISIL reaffirmed its rating.

The stock rallied 31 percent in four straight sessions and one of the reasons for the rally was also the company's decision to stop injecting money into SsangYong Motor Company (SYMC).

It was trading at Rs 355.05, up Rs 28.50 or 8.73 percent on the BSE at 1345 hours IST.

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M&M in its BSE filing on April 9 said CRISIL has reaffirmed its long term rating at AAA/Stable and short term rating at A1+ for the company's bank facilities.

The rating agency also reaffirmed its rating on the company's Rs 475 crore and Rs 500 crore non-convertible debentures at AAA/Stable, while the rating on commercial paper, which has been enhanced to Rs 1,000 crore from Rs 500 crore earlier, has also been reaffirmed at A1+, it added.

"The ratings continue to reflect M&M's leadership in the Indian tractor industry and healthy market position in light commercial vehicles (LCVs). The ratings also factor in a strong financial risk profile, supported by a robust balance sheet with low leverage and high financial flexibility," CRISIL said in its note.

These strengths are partially offset by exposure to cyclicality inherent in the farm equipment (tractor) and automotive (auto) segments, exposure to risks pertaining to acquisitions and investments in subsidiaries/joint ventures (JVs), and decline in market share in the utility vehicle (UV) space over the last few years, it added.

According to the rating agency, the outbreak of the novel coronavirus (COVID-19) is expected to affect each of the major segments over the near term - both in terms of disruption of the supply chain, and/or end-demand.

"Nevertheless, M&M's strong capital structure and liquidity position, along with the benefit of diversification of its business profile supports its credit profile," CRISIL said.

Meanwhile, on April 3, M&M in its special board of directors meeting, reviewed investment in SsangYong Motor Company and took a decision that it will not be able to inject any fresh equity into SYMC and has urged SYMC to find alternate sources of funding.

"However, with a view to enable SYMC to have continuity of business operations, whilst they are exploring alternate sources of funding, the board has authorised the M&M management to consider a special one-time infusion of up to 40 billion KRW ($32 million) over the next three months," company said.

Moreover, M&M said it would make every effort to continue to support all other non-fund initiatives that are currently in place to help SYMC reduce capex, save costs and secure funds.

The board had received the request from the management and labour union of SsangYong Motor Company for fresh injection of equity from M&M to help the company fund 500 billion KRW ($406 million) of requirements over the next three years.

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First Published on Apr 9, 2020 02:30 pm
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