Hero Honda's NCD gets LAAA

THE INVESTMENT Information and Credit Rating Agency (ICRA) has assigned LAAA rating to the Rs. 15 crore non-convertible debenture programme of Hero Honda Motors (HHML). The rating takes into account HHML's strong market position in the motorcycle segment, the conservative gearing, strong cash accruals, high profitability and return on capital employed and high liquidity. The rating also factors HHML's access to technology from Honda Motor Corporation, Japan (HMC). There is some uncertainty regarding the strategy of HMC for selling motorcycles through its 100 per cent subsidiary and its impact on HHML post-2004. In ICRA's view, the strong financial and market position of HHML is expected to alleviate these uncertainties.

HHML is a joint venture of Hero Cycles (P) Ltd and HMC with each partner holding 26 per cent equity stake. HHML was set up in 1985 to manufacture 4-stroke 100 cc motorcycles in India. HHML is the pioneer in 4-stroke two wheeler technology in India. The initial capacity of the motorcycle plant was 1.20 lakh motorcycles annually at Dharuhera (Haryana) which has been enhanced to six lakh motorcycles in 1999-2000. In 1997, HHML set up another manufacturing facility at Gurgaon (Haryana) for manufacturing 1.50 lakh motorcycles annually, which has been enhanced to 3.50 lakh motorcycles in 1999-2000. The total capacity of the HHML is currently 9.50 lakh motorcycles annually. HHML employs flexible manufacturing, enabling it to manufacture different models at both the plants depending upon demand.

HHML at present markets 100 cc 4-stroke motorcycles with brand names Splendour, Sleek, Street, CD100 SS and CD 100 DLX. In 1999- 2000, it has also launched a 156 cc 4-stroke motorcycle named CBZ. Over the years, the company has improved its market share to emerge as a leader in the motorcycles segment with a market share of 42 per cent as on March 31, 2000.

INOX Air Products

ICRA has assigned a LAA (SO) rating to the Rs. 60 crore non- convertible debenture programme of INOX Air Products (INOXAP). The rating indicates high safety. The NCD issue is backed by a `letter of comfort' from its foreign equity partner, Air Products and Chemicals Inc. (APC), of the U.S. The long term debt programme of APC is now rated at A3 by Moody's Investors Service, with a negative outlook in view of the apparent willingness of APC to acquire BOC group and take on large amounts of debt.

The rating takes into account the competitive market position of INOXAP, its steady operating cashflows, moderate gearing level and high interest and debt service coverage indicators. The rating also takes into account the financial support from the foreign partner. INOXAP, promoted by the Jain group, is engaged in the manufacture of industrial gases, air separation plants, LPG cylinders and disposable cylinders.

Consolidated Coffee

ICRA has assigned MAA plus (M double A plus) rating indicating high safety to the Rs. 32 crore non-convertible debenture programme of Consolidated Coffee (CCL).

CCL is a subsidiary of Tata Tea (TTL). TTL is rated LAAA and A1 plus by ICRA (highest safety in the long and short term). CCL with 6,251 hectares under coffee plantation operates as a fully integrated player in coffee business with a presence across the complete value chain. CCL's estates located in India's prime coffee growing districts of Coorg, Hassan and Chikmagalur are well maintained generating above average yields. During 1999- 2000, CCL had a net sales of Rs. 217.87 crores with a profit after tax of Rs. 26.11 crores.

Jindal Iron & Steel

ICRA has revised the rating assigned to the Rs. 150 crore non- convertible debenture programme of Jindal Iron & Steel Company (Jisco) to LAA minus (SO) from LAA plus (SO).

The revised rating also indicates high safety. The rating is based on the unconditional and irrevocable guarantee from IFCI for payment of principal and interest on the debentures.

The rating of Jisco has been downgraded following the downgrade of the rating of the long-term debt instruments of IFCI from LAA plus (L double A plus) to LAA minus (L double A minus). The downgrade of Jisco's rating reflects the change in the credit quality of the guarantor.

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