By: ICN Bureau
Last updated : March 06, 2018 8:18 pm
Fitch Ratings has upgraded India-basedKiri Dyes and Chemicals (KDCL) National Long-term rating to BBB+(ind) from \'BBB(ind)\'. The outlook is positive.
Fitch Ratings has upgraded India-basedKiri Dyes
and Chemicals (KDCL) National Long-term rating to BBB+(ind) from BBB(ind).
The outlook is positive.
The agency has also upgraded KDCLs bank facilities as follows:
Rs 666.4 million (enhanced from Rs 625 million) long-term outstanding loans and
Ra 1,700 million (enhanced from Rs 1,180 million) fund-based limits: upgraded to
BBB+(ind) from BBB(ind); and Rs 365 million non-fund based limits: upgraded
to F2+(ind) from F3(ind).
The upgrade reflects a successful institutional placement of Rs 2,390 million
shares in November 2010, whose proceeds were used to repay KDCLs short-term
loans and to partly fund its capex programme. The rating action also factors in
the successful turnaround of subsidiaries, Dystar Colours Deutschland GmBH and
Dystar Colours Distribution GmBH (Dystar), earlier than expected in the current
financial year.
As part of the turnaround strategy, Dystar has successfully outsourced 64 of its
reactive dye products to KDCL with the remaining 29 products likely to follow in
the next three to six months. As a result, consolidated EBITDA margins improved
to 6.8% for the nine months to the financial year ending March 2011.
The Positive Outlook reflects Fitchs expectations that the outsourcing strategy
and completion of capex will lead to a sustained improvement in KDCLs
consolidated credit profile and, eventually, a rating upgrade. KDCL is incurring
capex to expand the production of dye intermediaries (i.e. H.acid and vinyl
sulphone). New production of vinyl sulphone and H.acid is likely to start in
March and June 2011 respectively.
Higher working capital requirements at the Dystar subsidiaries resulted in
higher leverage (net debt to EBITDA) of 3.98x for 9MFY11.
Positive rating triggers include improvements in EBITDA margins leading to total
net debt to EBITDA below 3.5x on a sustained basis. Conversely, deterioration in
margins or any additional debt-led capex may result in the Outlook being revised
to Stable.
Lonsen group (China) has invested EUR 22 m at Kiri Holdings Singapore holding
company of Dystar group -- through convertible bonds which can be converted into
equity anytime within the next five years. In such an event, Dystar will become
a subsidiary of Lonsen group. Although this is likely to keep the strategic
linkages between KDCL and Dystar intact, it would result in a significant
reduction in overall debt levels and prompt an appropriate rating action by
Fitch.‎ -