Crisil downgrades Lafarge India's NCDs

THE AA plus (double A plus) rating assigned to the non- convertible debenture issues of Lafarge India by the Credit Rating Information Services of India (Crisil) has been downgraded to AA (double A). The P1 plus (P one plus) rating assigned to the Rs. 75 crore commercial paper programme of the company has been reaffirmed. The long term ratings have also been removed from rating watch, where they had been placed on January 10 subsequent to Standard & Poor's (S&P) placing the ratings of Lafarge India's majority holder, Lafarge SA's ratings, under rating watch with negative implications.

The revision in ratings is on account of the change in credit profile of Lafarge SA, whose support in terms of management, ownership, funding and technology is the key driver of Lafarge India's ratings. The long-term corporate credit rating of Lafarge SA has been lowered by S&P to BBB plus from A minus. The downgradation in ratings reflects the deterioration in Lafarge SA's credit profile because of the increased debt and tighter financial ratios subsequent to the acquisition of Blue Circle Industries plc.

Lafarge India's ratings continue to factor in its leadership position in the eastern cement markets and the synergies the company has been able to achieve between the recently acquired cement operations of Raymond and the erstwhile Tisco facilities.

The ratings also draw support from Lafarge India's ability to make significant operational improvements in its plants which have allowed it to operate at higher capacity and maximise production of blended cements besides lowering specific consumption parameters.

These coupled with the company's comfortable capital structure have helped improve Lafarge India's stand-alone credit profile. These ratings also factor in the company's presence in the competitive eastern markets and its moderate cash flow protection measures.

Lafarge India has a 2.25 million tpa split location cement plant in Chhattisgarh and Jharkand which it acquired from Tisco in November 1999. In January 2001, Lafarge took over Raymond's 2.2 million cement plant in Bilaspur, Chhattisgarh, taking its total installed capacity to 4.5 million tpa. Lafarge SA at present has a 71 per cent shareholding in Lafarge India through its holding companies, with the balance being held by other strategic investors.

- Corporate Bureau

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