Notifying the Company of the rating, Fitch said CEAT Kelani Holdings has a strong financial profile with low leverage and solid liquidity.
“Fitch expects CEAT Kelani Holdings’ cash to continue to exceed debt in the next few years,” the agency said.
The AA+ credit rating is the second highest rating assigned by Fitch Ratings to reflect an entity’s ability to meet financial commitments.
A key ratings driver for CEAT Kelani Holdings was the Company’s leading market position with an overall market share of around 50 per cent.
Fitch said it expects CEAT Kelani Holdings' revenue to rise in FY22 as it believes competition from imports will not swiftly return to levels prior to the pandemic.
Increased radialisation efforts should enable CEAT Kelani Holdings to gain a stronger foothold in the radial (car, van and sports utility vehicle) market, where 60 per cent of sales volumes are by imported brands, the agency said, noting that “CEAT Kelani Holdings hopes to increase the contribution of radial tyres to 30 per cent of sales in FY22 from 20 per cent in FY21, and settle at around 40 per cent in FY23 by expanding production capacity.
This should mitigate the long-term structural decline in demand for bias tyres.”
Commenting on the rating, CEAT Kelani Holdings Managing Director Mr Ravi Dadlani said:
“We are pleased to receive an AA+ rating from Fitch, which reflects the financial strength of the business based on market leadership in multiple product segments, our value proposition, low level of leverage, and the impacts of our investments to expand production.
We are extremely positive about the prospects for the business, and expect to continue to invest in capacity and range expansion as well as quality improvements.”
CEAT Kelani Holdings is considered one of the most successful India – Sri Lanka joint ventures.
The joint venture’s cumulative investment in Sri Lanka to date totals Rs 8 billion, inclusive of Rs 3 billion invested since January 2018 for expansion of volumes, technology upgrades and new product development.
The company’s manufacturing operations in Sri Lanka encompass pneumatic tyres in the radial (passenger cars, vans and SUVs), commercial (nylon and radial), motorcycle, three-wheeler and agricultural vehicle segments.
The CEAT brand accounts for market shares in Sri Lanka of 48 per cent in the Radial segment, 80 per cent in the Truck category, 84 per cent Light Truck tyre category, 51 per cent in the Three-Wheeler tyre segment, 36 per cent in the Motorcycle tyre segment and 72 per cent in the Agricultural vehicle tyre category.
CEAT Kelani exports about 20 per cent of its production to 16 countries in South Asia, the Middle East, Africa and the Far East.