Rationale

 The ratings continue to derive comfort from strong parentage - Carborundum Universal Limited (CUMI)1 and Wendt GmBH2 , Wendt (India) Limited's (WIL) strong market position in the domestic super abrasive industry, reputed client profile and longstanding experience of the promoters in the industry. WIL's business and financial profile remains stable supported by stable demand from its customers across the end user segments such as steel, automobile, cutting tool, bearing industry etc, healthy margins (with OPM of 23.7% and core RoCE of 25.5% in H1 FY2022) and debt free status and healthy liquidity profile on the back of strong cash accruals. The ratings, however, remain constrained by vulnerability of WIL's revenue and earnings to economic activities and capex cycle in the end-user industries. Given the pandemic impact on economic activities and automotive production, which accounts for a substantial portion (~30%) of the company's sales, WIL's revenues were affected during FY2021. This apart, the company faces high competition from other players (both domestic and imports) in the super abrasive and non-super abrasive segment. While the company's margins are susceptible to raw material price fluctuations, the various cost control measures and passthrough clauses against commodity inflation insulates WIL's margins to a large extent. The Stable outlook on the [ICRA]AA- rating reflects ICRA's opinion that the company will continue to benefit from the current healthy demand trends across segments, its long track record of operations, reputed client profile, the expected improvement in its financial profile with improving credit metrics and margins and adequate liquidity position.