Atul: rating reaffirmed

The BB plus rating assigned to the Rs. 29.89 crore non- convertible debenture issue of Atul (AL) has been re-affirmed.

The rating reaffirmation factors in the improving trend in the company's profitability over the past one-two years and reduction in its total borrowing during the first nine months of the current financial year. In addition, the rating takes into account the growth achieved in agro-chemicals and aromatics businesses, continued above-average performance of the high-value vat and reactive dyes business, company's effort to reduce its cost structure and rationalise the product mix, and backward integration in operations supported by effective pollution control facilities.

However, these factors are partly offset by high cost of operations and overheads in the Atul unit, high gearing, poor interest and debt service coverage ratios, and high level of receivables. In addition, the pressure on the company's cash flow position continues primarily on account of cash accruals being lower than its loan repayment requirements. As a result, the company's ability to refinance the loans or raise additional loans assumes key importance. The financial flexibility of the company, however, is supported by high market value of its investments.

The company is engaged in the manufacture of a wide range of synthetic dyes (vat, reactive, disperse, acid, and direct dyes) and is integrated backwards for most of its requirements of major intermediates, chemicals, and power. During 1999-2000, the company derived around 47 per cent of its total sales (Rs. 506 crores) from dyes. In addition, it also produces aromatic chemicals (comprising around 19 per cent of total sales in 1999- 2000), agro-chemicals (around 10 per cent), epoxy resins, and other bulk intermediate chemicals.

Send this article to Friends by E-Mail

Section  : Business
Previous : Coal India's rating downgraded
Next     : Tata SSL's rating upgraged