Crisil upgrades Ballarpur's NCDs ratings

THE CREDIT Rating Information Services of India (Crisil) has upgraded the ratings assigned to the various non-convertible debenture (NCD) programmes of Ballarpur Industries (BILT) to A from BBB (pronounced Triple BBB). The rating assigned to the Rs. 53.25 crores NCD programme of APR, a group company, has also been upgraded to A from BBB minus (Triple B minus), subsequent to the NCD being transferred to BILT as part of the restructuring exercise undertaken by the company. The FA minus rating assigned to the fixed deposit programme of the company has also been upgraded to FA plus. All these ratings have also been removed from rating watch with developing implications, where they were put subsequent to the company's announcement of undertaking a restructuring exercise among BILT and a group company APR entailing movement of assets and liabilities across these companies.

The rating upgradation reflects the anticipated improvement in the company's financial risk profile on account of the proposed reduction in the company's debt usage level in the medium term from the expected surplus cashflows from operations and sale of certain strategic investments. The ratings also factor in BILT's enhanced business profile on account of its sustained strong market position in the domestic writing and printing paper industry, its improving product mix towards value-added segments coupled with the improved outlook on the paper industry.

The improvement in the company's performance on various operating parameters and the rationalisation of its cost structure through various upgradation and modernisation projects in the recent past, have also enhanced its cost competitiveness in the industry.

The ratings also reflect the impact of the comprehensive restructuring carried out by BILT in the recent past and the clear focus shown by the management to concentrate on its core paper business.

The ratings are, however, constrained by the company's adverse capital structure at present, its moderate, though improving liquidity position, the relatively high cost operations at two of its paper units and its susceptibility to fluctuations in international paper prices and the inherent cyclicality in the domestic paper industry. The ratings also factor in the limited risk arising out of the proposed capacity enhancement and quality upgradation projects, being proposed to be implemented during the next two years.

Ballarpur Industries, is one of the leading players in the paper industry with a market share of around 10 per cent, in the domestic writing and printing (WPP) paper industry. At present, it has a total capacity of around 2.3 lakh tpa of paper and a pulping capacity of around 3.3 lakh tpa, spread across five pulp and paper manufacturing facilities across the country. BILT is the flagship company of the Thapar group.

BILT has recently completed a comprehensive restructuring exercise aimed at transforming it from a diversified conglomerate to a company focussed on its core business. While the first phase of restructuring was aimed at divesting/exiting from the unrelated and non-profitable businesses (including transfer of investments to its 100 per cent subsidiary - Janpath Investments and Holdings) and improving the competitiveness of the paper business through funds infusion, the second phase was mainly aimed at re-alignment of businesses between BILT and its group company APR.

Madras Aluminium

A P1 plus (P one plus) rating has been assigned to the Rs. 21.50 crore commercial paper programme of Madras Aluminium Company (Malco).

The rating reflects the integrated nature of the company's operations and the expected improvement in the company's performance on the key techno-economic parameters and its capital structure. The rating also takes into account the expected sustenance of Malco's comfortable cash flows, given the positive outlook on the aluminium industry. The rating is, however, tempered by the company's relatively smaller capacity. The rating also factors the limited risks that would arise on account of the proposed brown-field expansion project at its existing manufacturing facilities.

Malco, part of the Sterlite group of companies, is a primary aluminium producer with its manufacturing facilities located at Mettur, Tamil Nadu. The company's operations are fully integrated starting from bauxite mining to wire rods / sheets manufacturing. It also has captive power plant that suffices its entire power requirements. Presently, the company is modernising its manufacturing facilities, which is expected to result in an improvement in its cost structure. Further, it is also proposing to implement a brown field expansion project at its existing manufacturing facilities. The company has reported a profit after taxation of Rs. 18.67 crores on a net sales of Rs. 153.78 crores during the nine-month period ended March 31, 2000.

Nuclear Power Corpn.

Crisil has upgraded the rating assigned to the Rs. 908 ccrore and Rs. 300 crore bond programmes of Nuclear Power Corporation (NPC) to AAA (Triple A). The upgradation is based on significantly improved cash flows of NPC on account of sustained increase in plant load factors along with better collections of dues from State electricity boards (SEBs) in the past few years. The improvement in NPC's finances is reflected in declining gearing levels and healthy interest coverage.

The rating continues to derive support from NPC's favourable business position with competitive tariffs and a sound financial profile with a low gearing, sizable net worth and high profit margins. The rating factors in Government ownership and sustained high level of Government support to the corporation on account of its strategic role in the Government's nuclear policy. The Government supports NPC by way of managerial and R&D inputs, high level of budgetary transfers through regular equity infusions, facilitating collection of dues from SEBs through appropriation of central plan transfers and supply of nuclear fuel material from Department of Atomic Energy (DAE).

These factors are partly offset by implementation risk associated with the new projects and continued high level of debtors, on account of weak financial position of most of the SEBs.

India Cements Capital

The FA minus rating assigned to the fixed deposit programme of India Cements Capital and Finance has been suspended due to lack of co-operation from the company for carrying out a rating review.

Lakshmi Finance

The FB rating assigned to the fixed deposit programme of Lakshmi Finance and Industrial Corporation has been withdrawn as the company has repaid all the fixed deposits.

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