India Ratings and Research (Ind-Ra) has upgraded JK Tyre & Industries Limited’s (JKTIL) Long-Term Issuer Rating to ‘IND A+’ from ‘IND A’. The rating outlook has also been revised to Stable from Negative.
The rating reflects JK Tyre’s strong operational and financial performance. The upgrade echoes a significant improvement in the company’s credit metrics on account of improved profitability and better working capital management.
In FY23, JK Tyre achieved robust Y-o-Y revenue growth of 22%, driven by various supporting factors. These include a favorable change in the product mix, higher sales volume, improved realizations and strategic management initiatives. The company focused on premiumization across different segments, expanded the customer base, and introduced newer tyre categories such as Smart tyres, Puncture Guard tyres, luxury car tyres and EV tyres.
JK Tyre has also consistently improved its working capital cycle by implementing initiatives related to receivables and inventory management. Furthermore, the replacement market has experienced strong demand, contributing significantly in FY23 to the overall income stream. Also, increased focus on margin-accretive new product launches, improved capacity utilization, and targeted export market sales have been major contributors, along with a consistent rise in high-margin product categories like radials and 2W/3W tyres.
India Ratings expects the company to continue its positive trajectory, including a reduction in net leverage below 3.0x by FY24. It also foresees sustained growth in JK Tyre’s revenue, supported by strong demand from original equipment manufacturers (OEMs) and a buoyancy in the replacement market.