ICRA reaffirms Dalmia Cement's NCD, FD ratings

THE INVESTMENT Information and Credit Rating Agency (ICRA) has reaffirmed the long and medium term ratings assigned to the NCD and FD programmes of Dalmia Cement (Bharat) (DCBL) at LAA minus (L double A minus) and MAA minus (M double A minus), respectively. The ratings indicate high safety. The short term rating of A1 plus assigned to the Rs. 30 crore commercial paper programme has been retained for an enhanced amount of Rs. 70 crores. This rating indicates highest safety in the short-term.

DCBL was established in 1939 at Dalmiapuram in Tamil Nadu. The main divisions of the company are cement and sugar, which together contribute to more than 80 per cent of the turnover of the company. The other businesses of DCBL that is wind farm, magnesite, refractories, chip capacitors, electronics and travel divisions contribute to the balance.

The rating takes into account steady financial performance of DCBL during 1999-2000 and 2000-01. DCBL continues to benefit from operating efficiencies and locational advantages of its cement unit in Tamil Nadu. The sugar division contributed higher profits due to commissioning of increased capacities in 1999-2000.

The rating also factors in the oversupply of cement in Southern India, which is expected to continue in the short to medium term and which is likely to have an impact on realisations. Large sugar stocks in the country are also likely to have an impact on realisations in the sugar division. These coupled with losses in the electronics, magnesite and refractory businesses and large loan repayments, are likely to have an impact on the coverage indicators in the medium term. DCBL has liquid investments and unutilised bank limits which it can use to address temporary liquidity strains.

Dandapani Finance

ICRA has assigned an MA plus rating to the NCD programme and reaffirmed the MA plus rating for the fixed deposit programme of Dandapani Finance (DFL). The ratings indicate adequate safety. The rating agency has upgraded the rating of the Rs. 6 crore commercial paper programme A1 to A1 plus (A one plus). The rating indicates highest safety in the short term.

The rating factors in DFL's consistent collection performance, its low financial risk, favourable asset liability matching and financial flexibility because of its low gearing. DFL continues to focus on financing light and medium commercial vehicles, earth moving equipment and commercial tractors to medium and small- scale operators in the semi-urban and rural areas of Tamil Nadu, Andhra Pradesh and Karnataka. DFL's focus on its niche segment has helped it to insulate its lending rates to a certain extent.

The ability of DFL to protect its profitability and asset quality will be critical in a competitive market. In spite of the higher risk perception of its business, DFL has been able to maintain high collection efficiency through its established appraisal systems and strong recovery mechanism.

Corporate Bureau

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Section  : Business
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