India Ratings & Research (Ind-Ra) has affirmed Hi-Tech Gears (HGL) long-term issuer rating at 'A'. The outlook is stable.

The affirmation reflects HGL's strong operating profitability and credit profile. Although operating EBITDA margins declined to 12.5% in FY14 from 13.9% in FY13, financial leverage increasing remained below 1x and interest coverage improved  to 10x due to reduced debt levels.

The ratings reflect HGL's comfortable liquidity with its average use of the working capital bank limits being 6.5% in the 12 months ended June 2014. The company has moderate working capital requirements due to a short net cash conversion cycle, although it increased to 57 days in FY14 due to an increase in receivable collection period in both domestic and export markets.

The ratings also factor in HGL's long-established relationship with Hero MotoCorp (HML) and its growing customer base. The company has added new customers namely Cummins Inc, Daimler India Commercial Vehicles, JCB India among others over the years.

The ratings are constrained by HGL's smaller size of operations than that of the higher rated entities and high degree of customer concentration, as its largest customer HML accounts for about 60% of its total sales. HGL's revenue declined about 3.3% yoy to Rs 3,610 million in FY14 due to a decline in commercial vehicle volumes and subdued demand for two wheelers.

Shares of the company declined Rs 5, or 2.43%, to settle at Rs 200.75. The total volume of shares traded was 19,940 at the BSE (Tuesday).