Crisil's FAA for IPCL's FD programme

THE CREDIT Rating Information Services of India (Crisil) has assigned FAA (F double A) rating to the fixed deposit programme of Indian Petrochemicals Corporation Limited (IPCL). A AA minus (double A minus) rating has also been assigned to the Rs. 30 crores non-convertible debenture issue of the company. In addition, a P1 plus (P one plus) rating has been assigned to the Rs. 100 crore short-term debenture issue of IPCL. The AA minus (double A minus) ratings assigned to the Rs. 128 crores non- convertible debenture issue and Rs. 50 crores non-convertible debenture issue of the company have also been re-affirmed. The P1 plus (P one plus) rating assigned to the commercial paper programme of IPCL has also been re-affirmed for an enhanced amount of Rs. 450 crores.

The high-safety category ratings take into account the improvement in the company's manufacturing integration at its Gandhar complex with the commissioning of gas cracker during 1999-2000 coupled with reduced uncertainties regarding availability of feedstock for Gandhar complex. In addition, the ratings continue to factor in IPCL's leading market position in the domestic polymers industry, geographical diversified and integrated manufacturing operations, and cost benefits associated with access to cheaper feedstock (natural gas) at the Nagothane complex.

Further, the short-term ratings continue to be supported by the existing foreign currency assets with IPCL. These strengths are partly offset by volatility in the company's profitability arising from movement in international prices of petrochemicals and expected over-capacity in the domestic marketplace, higher cost of production at the Vadodara complex, and relatively high level of gearing. However, Crisil expects the company's capital structure to improve from existing levels supported by low capital expenditure requirements.

IPCL is India's leading integrated producer of polymers, fibres and fibre intermediates, and chemical products derived from hydrocarbon feedstocks. During 1999-2000, revenue from the sale of polymers constituted around 75 per cent of the company's total sales of around Rs. 4,920 crores. The Government at present holds around 60 per cent equity stake in the company. The Government has plans to disinvest 25 per cent of its equity stake in IPCL.

Aarti Industries

The P1 rating assigned to the commercial paper programme of Aarti Industries (AIL) has been re-affirmed for an enhanced amount of Rs. 10 crores.

The rating factors in the economies of scale derived from the company's large installed capacities for basic nitro and chloro benzene derivatives, value addition through manufacture of a wide range of downstream intermediate products, diversity in user industries and customer base, and an established position in exports of dye intermediates.

The rating also takes into account the relatively comfortable operating profitability and interest coverage ratios of the company. However, the rating is constrained by the limited pricing flexibility on account of commodity nature of most of the company's products, high degree of competition in the industry, relatively high level of receivables, and moderate gearing.

AIL is engaged in the manufacture and sale of benzene-based derivatives (under its organic products division) and sulphur based products such as sulphuric acid and di-methyl sulphate (under its acid division). During 1998-99, the company derived around 75 per cent of its turnover from organic products and the balance from its acid division.

GE Capital

A AAA (triple A) rating has been assigned to the Rs. 100 crore non-convertible debenture programme of GE Capital International Services (GECIS). The rating factors in the strong parentage of the company, the strategic importance of GECIS to its parent and the support extended to it by its parent in terms of management, funding, infrastructure and information systems. The rating also factors in the assured nature of business, strong growth prospects and high profitability.

GECIS is a 100 per cent subsidiary of General Electric Capital Corporation (GECC), which in turn is a 100 per cent subsidiary of GE Capital Services Inc. (GECS), of the U.S. GECS is the largest lessor in the world and is the only full service U.S. Financial Institution with AAA ratings from both Standard & Poor's and Moody's. GECIS was set up in May 1996 with the objective of carrying out back-end financial services activities out of India for GE group companies worldwide.

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