Rating Watch
FE NEWS SERVICE
Kothari Sugars' FD, NCD downgraded by CrisilThe rating assigned to the non-convertible debenture programme of Kothari Sugars and Chemicals Limited (KSCL) has been downgraded from `A+' to `A'. The rating assigned to the fixed deposit program has been downgraded from `FAA-' to `FA+'. The revised ratings indicate that the degree of safety with regard to timely payment of interest and principal is adequate. The revised rating reflect the increased risks arising out of delays and cost overruns involved in the company's various projects, and their effect on the overall financial performance of the company. With a bulk of the company's expansion having been funded largely out of debt, there has been a substantial increase in the overall leveraging (total debt - tangible net worth) which is expected to impact the company's profitability in he medium term. The increased risks are however offset to an extent by the vertically integrated nature of the company's operations especially in the petrochemicals
business which provides stability in terms of steady profitability as well as cash flows. The revised rating also factors in KSCL's plans to reduce its gearing levels in the near future. KSCL is involved in a variety of businesses including sugar, alcohol, power and petrochemicals. The petrochemicals business accounts for over 60 per cent of the company's overall sales with the rest coming from the sugar division. Both the divisions are highly integrated and produce a wide variety of value added products. ICICI Bank's certificate of deposit upgraded by Crisil The rating assigned to the Certificate of Deposit programme of ICICI Banking Corporation Limited (ICICI Bank) has been upgraded to `P1+' from `P1'. The revised rating indicates that the degree of safety regarding the timely payment of financial obligations, on the instrument, is very strong.The rating reflects the strong parentage of ICICI Bank, steady growth in business, adequate profitability, improving profile of resource mix and the
benefits accruing out of use of modern technology. The rating also factors the bank's focus on mid-sized corporates for lending, relatively small size of operations and short track record. Ashok Leyland FD, other instruments downgraded The `AA+' ratings assigned to the Rs 24.2 crore non-convertible debentures (series V), Rs 20 crore NCD (Series IX), Rs 232 crore NCD (Series VIII) and to the Rs 250 crore NCD (Series V) of Ashok Leyland Limited (ALL) have been downgraded to `AA'. The revised rating indicates high safety with regard to timely payment of interest and principal. The `FAA+' rating assigned to the fixed deposit programme of ALL has been downgraded to `FAA' indicating that the degree of safety with regard to timely payment of interest and principal is strong. A `P1+' rating has been assigned to the company's Rs 75 crore commercial paper programme (enhanced from Rs 50 crore) indicating that the degree of safety with regard to timely payment on the instrument is very strong.The revision
in ratings are reflective of ALL's high degree of vulnerability to the cyclical automobile industry, the sharp decline in sales volume as a result of the ongoing economic slowdown and the weakening financial risk profile of the company as reflected in the increased debt levels and declining coverage ratios. The revised rating also takes into consideration ALL's stable marker position in the medium & heavy commercial vehicles (M&HCV) market and the size of its operations. ALL has a networth of Rs 1030 crore as on September 30, 1997. ALL registered a turnover of Rs 819 crore and a loss of Rs 32 crore for the first six months ended September 30, 1997. Pennar Aluminium's NCD downgraded by Crisil The `BB' rating assigned to the Rs 28.25 crore NCD issue of Pennar Aluminium Company Ltd (PALCO) has been downgraded to `D'. The revised rating indicates that the instrument is in default or is expected to default on maturity. The revised rating reflects the company's strained financial position on account of
severe competition from imports, reduction in import duty and unremunerative prices for its strips. PALCO is engaged in the manufacture and sale of aluminium strips and conductors. Crisil downgrades Lloyds Steel's Deep Discount Bond The rating of Lloyds Steel Industries Limited's Rs 9.75 crore Deep Discount Bond programme has been downgraded to `C' from `BBB'. The revised rating indicates that the instrument is vulnerable to default. The rating factors in the continual deterioration in credit quality due to poor profitability from the steel business arising out of poor demand offtake, low international steel prices for flat steel products and high cost operations. The company has posted cash losses of Rs 33.7 crore for the half-year ended September 30, 1997, and is expected to make further cash losses for the year 1997-98.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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