Date:17/07/2004 URL: http://www.thehindubusinessline.com/2004/07/17/stories/2004071703030300.htm

Back Kanoria Chem scores well on Crisil governance rating

Our Bureau

Kolkata , July 14

CRISIL has assigned "CRISIL GVC Level 3" rating to Kanoria Chemicals & Industries Ltd. The governance and value creation (GVC) rating indicates that the company's capability with respect to creating wealth for all stakeholders, while adopting sound corporate governance practices, is strong.

The rating reflects the transformation of Kanoria Chemicals' board from a promoter-driven body to a professional one, as supported by the inclusion of a large proportion of independent directors, the consequent improvement in skill sets, and their increasing contribution to the board's functioning. The rating also reflects the management's above-average competence, reflected in the performance of the company's core businesses.

A statement from Crisil (Credit Rating Information Services of India Ltd) notes that the board's oversight on operational issues of the company is satisfactory. "The independent directors' greater involvement in strategic decisions would, however, help the company to extract better value from their experience," the rating agency said.

The post of Chairman-cum-Managing Director is executive in nature; Crisil feels that separate posts for CEO and Chairman are desirable.

The rating is constrained by Kanoria Chemicals' "moderate levels" of value creation for its equity shareholders, it is felt. This is reflected in the return on invested capital (ROIC), which has been lagging behind the weighted average cost of capital. The company also has "average standards" of disclosing related party transactions, and corporate, financial and operational information, to all stakeholders.

The company, which has a moderate credit profile, also has high levels of safety measures at its plants. It has a good employment generation record, while its value creation to society is above average, the rating agency said.

Kanoria Chemicals manufactures chemical intermediates, catering to industries such as aluminium, paints, paper, pharmaceuticals, PVC and water treatment. It has manufacturing facilities at Renukoot in Uttar Pradesh and Ankleshwar in Gujarat. It also operates a 25-MW thermal power plant at Renukoot.