BHEL's bond programme gets AAA from Crisil

By Our Corporate Bureau

CHENNAI, SEPT. 2. Crisil has assigned AAA (triple A) to the Rs. 500 crore bond programme (enhanced from Rs. 300 crores) and P1 plus rating to the Rs. 750 crore short term debt programme (enhanced from Rs. 500 crores) of Bharat Heavy Electricals (BHEL). The FAAA (F triple A) rating assigned to the fixed deposit programme of BHEL has been reaffirmed.

The ratings reflect the leadership position of BHEL in the domestic power plant and heavy engineering sectors. With the receipt of the Rs. 2,000 crore Rihand order and Rs. 1,100 crore Ramagundam order, the company has adequate order book to support at least modest growth in turnover over the next 2-3 years.

In an industry, where business prospects are critically linked to economic cyclicality and dependent on high value orders, BHEL's strength emanates from its reasonably favourable financial profile which provides it adequate cushion against periods of slowdown in order inflows. Despite a huge payout on account of wage arrears and operational restructuring exercise through voluntary retirement scheme, BHEL's financial profile continues to be characterised by low gearing and high coverage ratios which are consistent with financial measures for the highest safety category. The company is making efforts to tackle the issue of receivables from State electricity boards (SEBs).

However, considering the weak financial position of most of the SEBs the efficacy of these efforts remains to be seen. Going forward, the company's credit quality would be dependent on its ability to maintain its cost competitiveness in a scenario of greater competition especially from global majors in this field. Reducing customer/order concentration risk through exports and renovation and modernisation contracts would be critical to sustain the company's existing business risk profile.

Oriental Bank of Commerce

Crisil has assigned AA plus (double A plus) rating to the Rs. 200 crore bond issue of Oriental Bank of Commerce (OBC). The FAAA (F triple A) rating assigned to the fixed deposit programme has been reaffirmed. The P1 plus rating assigned to the certificates of deposit programme has also been reaffirmed.

The rating reflects its adequate capitalisation, comfortable resource and liquidity position, and relatively low level of net NPAs. The rating also factors in the high likelihood of support available to the bank by virtue of its majority government ownership. These factors are partly offset by the bank's regional focus, and profitability pressures on account of the average credit quality of its portfolio.

OBC is a medium sized nationalised bank with a market share of 2.6 per cent of total deposits of all the scheduled commercial banks as on March 31, 2001. The Government has a 66.5 per cent stake in OBC with the balance being widely held. OBC has a predominant focus in north India, with 80 per cent of its branches accounting for 60 per cent of its advances to this region. The bank had an asset base of Rs. 27,072 crores as at March 31, 2001 and reported a PAT of Rs. 202 crores for the year ended March 31, 2001.

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Section  : Business
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