CARE Ratings Reaffirms Everest Kanto Cylinder’s A-/A2+ Credit Ratings

CARE Ratings Maintains Everest Kanto Cylinder’s Credit Ratings Amidst Operational Challenges

The reaffirmation of Everest Kanto Cylinder’s credit ratings highlights the company’s resilience despite external pressures.

Stable Performance Amidst Challenges

CARE Ratings’ reaffirmation of Everest Kanto Cylinder (EKCL) at ‘A-‘ for long-term and ‘A2+’ for short-term reflects the company’s stable operational performance in FY26. Despite facing challenges from geopolitical tensions, particularly the West Asia conflict, EKCL managed to maintain stable total operating income (TOI) and improved profitability. The conflict has disrupted supply chains and increased logistical costs, leading to a moderation in performance in Q1 FY27.

Strategic Capacity Expansion Initiatives

To bolster its market position, EKCL is pursuing strategic capacity expansion initiatives across India, Egypt, and the United States. The timely completion of these projects is crucial for the company’s future growth and will be closely monitored by CARE Ratings. This expansion is expected to enhance EKCL’s production capabilities and cater to the growing demand for high-pressure seamless gas cylinders.

Strengths and Weaknesses of the Ratings

The ratings derive strength from EKCL’s established position as a leading manufacturer of high-pressure seamless steel gas cylinders, supported by a diversified customer base that includes automobile OEMs, city gas distribution entities, and industrial gas users. The company benefits from high entry barriers due to stringent regulatory requirements, a comfortable capital structure, and adequate liquidity.

However, the ratings are tempered by fluctuating profitability influenced by raw material price volatility and foreign exchange risks. Additionally, the ongoing capital expenditures in India, Egypt, and the US pose execution and stabilization risks, particularly with the high-cost foreign-currency debt incurred for the Egyptian project.

Recent Financial Performance

In its latest financial results, EKCL reported a significant 41.79% decline in consolidated net profit to Rs 30.03 crore for Q1 FY27, despite a 10.49% increase in revenue to Rs 346.31 crore compared to Q1 FY26. This contrasting performance underscores the challenges faced by the company in maintaining profitability amidst rising operational costs and external pressures.

Market Reaction

Following the reaffirmation of its credit ratings, EKCL’s shares saw a slight increase, trading up by 0.66% to Rs 107.55 on the Bombay Stock Exchange. This modest uptick reflects a degree of investor confidence in the company’s stability and future growth prospects, despite the ongoing challenges in the market.

Key Highlights

• CARE Ratings reaffirmed EKCL’s long-term rating at ‘A-‘ and short-term rating at ‘A2+’.
• The company’s performance in FY26 was stable despite geopolitical challenges.
• Strategic expansions in India, Egypt, and the US are underway.
• Consolidated net profit fell by 41.79% in Q1 FY27, despite revenue growth.
• Shares of EKCL rose by 0.66% following the rating reaffirmation.

Investor Note: Investors should monitor EKCL’s ongoing capacity expansion projects and their impact on profitability, as well as the potential risks associated with raw material price fluctuations and foreign exchange volatility.