CRISIL has placed the bank facilities and debt instruments of Chambal Fertilisers and Chemicals Ltd (Chambal) on ?Watch with Developing Implications? following Chambal?s announcement of demerging its shipping business into Indian Steamship Ltd (ISS), currently a wholly owned subsidiary of Chambal.

As part of the demerger scheme, the shipping assets and liabilities will be transferred to ISS. Chambal will be investing Rs.100 million as redeemable preference shares and Rs.3.28 billion as equity for a 44 per cent stake in ISS. CRISIL believes that transfer of the asset-heavy shipping business to an independent entity will benefit Chambal?s business profile and augment its return on capital employed. The demerger is also aimed at de-leveraging Chambal?s capital structure. While the final contours of the demerger scheme are in the process of being worked out, CRISIL is in discussion with the management of Chambal to understand the modalities of transfer and assess the impact of the proposed transfer on Chambal?s ratings.

The ratings continue to reflect Chambal?s established position in the urea industry, superior operating efficiency, and high financial flexibility. These rating strengths are partially offset by the company?s leveraged capital structure, and by the regulated nature of the fertiliser industry.