CRISIL has reaffirmed its ratings of ?BB-/Stable/P4+? on the bank facilities of Rama Phosphates Ltd (RPL).  The ratings continue to reflect RPL?s susceptibility to adverse changes in government regulations and its limited track record of profitable operations. These weaknesses are partially offset by the benefits RPL derives from the Government of India?s nutrient-based subsidy for single super phosphate (SSP) manufacturers.

*Includes Adhoc limit of Rs.45 Mn, ^ Fully interchangeable with Bank Guarantee
# Includes Adhoc limit of Rs.10 Mn

Outlook: Stable

CRISIL believes that RPL?s credit risk profile will remain stable over the medium term, backed by expected growth in revenues and profitability. The outlook may be revised to ?Positive? if the company achieves more-than-expected profitability and net cash accruals while efficiently managing its working capital. Conversely, the outlook may be revised to ?Negative? if the company?s revenues, operating margin, and operating cycle weaken, exerting significant pressure on its profitability and liquidity, or if adverse regulatory changes impact its growth and profitability, thereby weakening its credit risk profile.

Update

The company moved out of the purview of the Board for Industrial and Financial Reconstruction in December 2010, after settling all financial obligations by October 2010.In November 2010, the central government announced changes to its nutrient-based subsidy policy on fertilizers. The subsidy on phosphate was slashed by nearly 20 per cent and around 16 ? 17 per cent on other nutrients; these changes will take effect starting April 2011. CRISIL believes that the lower subsidy for SSP manufacturers may result in the increase in the farm gate price of SSP and adversely affect the competitiveness of SSP vis-?-vis other fertilizers. This may also adversely affect the revenues and profitability of RPL. However, recent announcement by the government to increase the subsidy on the nutrients might be favorable to the revenue growth of RPL. CRISIL will closely monitor the impact of regulatory changes on RPL?s credit risk profile.