By: ICN Bureau
Last updated : November 30, 2022 2:16 pm
CRISIL has revised its rating outlook on the long-term bank facilities of Meghmani Organics Ltd (Meghmani) to "˜Stable' from "˜Positive', and has reaffirmed the rating at "˜CRISIL A'. The rating on the company's outstanding short-term bank
CRISIL has revised its rating outlook on the long-term bank facilities of Meghmani Organics Ltd (Meghmani) to ?Stable? from ?Positive?, and has reaffirmed the rating at ?CRISIL A?. The rating on the company?s outstanding short-term bank facilities has also been reaffirmed, at ?CRISIL A1?.
| Rs.1.51 Billion Cash Credit/Working Capital Demand Loan (Enhanced from Rs.300 Million)# | CRISIL A/Stable (Reaffirmed; Outlook Revised from 'Positive') |
| Rs.300 Million Standby Fund-Based Limits (Reduced from Rs.345 Million) | CRISIL A/Stable (Reaffirmed; Outlook Revised from 'Positive') |
| Rs.1.14 Billion Export Packing Credit* | CRISIL A/Stable (Assigned) |
| Rs.250 Million Standby Non-Fund-Based Limit (Enhanced from Rs.185.80 Million) | CRISIL A1 (Reaffirmed) |
| Rs.1000 Million Letter of Credit & Bank Guarantee (Enhanced from Rs.900 Million)@ | CRISIL A1 (Reaffirmed) |
# Two way interchangeability between Cash Credit
/Working Capital Demand Loan and EPC/PCFC limits. Includes Demand Cash Credit
against Export Bills to the extent of Rs.130 Million.
@ Full interchangeability between LC & BG limits.
* Export packing Credit interchangeable with PCFC/FBD
The outlook revision follows Meghmani?s proposal for undertaking an additional
and mainly debt-funded capital expenditure (capex) programme of Rs.1.7 billion
in 2011-12 (refers to the financial year, April 1 to March 31). The capex, to
augment capacities mainly in the chlor alkali and pigments businesses, is
expected to result in the company?s gearing remaining over 1.3 times till
2012-13 as compared with CRISIL?s earlier expectation of the gearing reducing to
less than 0.9 times over this period. Though the demand outlook across
Meghmani?s business segments is likely to remain healthy resulting in steady
cash generation, the large debt contracted for the proposed capex is likely to
result in the company?s debt protection metrics deteriorating from the adequate
levels expected earlier.
The ratings continue to be supported by Meghmani?s established market position
in the pigments and agrochemicals segments, diversified customer base, and the
significant cost advantage the company derives from its backward integration of
operations into the manufacture of copper phthalocyanine blue (the key raw
material for pigments), and cypermethric acid chloride, metaphenoxy benzaldehyde,
and metaphenoxy benzyl alcohol (key intermediates in crop protection
production). These rating strengths are partially offset by Meghmani?s large
working capital requirements arising out of seasonality in its business, and its
average financial risk profile driven by large debt-funded capex.
For arriving at its ratings, CRISIL has combined the business and financial risk
profiles of Meghmani and its subsidiaries, because all these entities are under
a common management and have close operational and financial linkages.
Outlook: Stable
CRISIL believes that Meghmani will benefit over
the medium term from its stable cash accruals and the expected completion of its
capex programmes in 2011-12. The outlook may be revised to ?Positive? in case of
higher-than-anticipated profitability, also leading to faster correction in its
gearing levels. Conversely, the outlook may be revised to ?Negative? in case of
further debt-funded capex or drop in realisations from key product lines,
leading to lower profitability, and impacting the company?s gearing and debt
protection metrics.