Date:13/08/2006 URL: http://www.thehindubusinessline.com/bline/iw/2006/08/13/stories/2006081301080600.htm

Back Re-rating rules

MADRAS CEMENTS' Alathiyur plant.

Rarely is a company irked so much by a downgrade in rating that it dumps the rating agency to move to another one. In an unusually dramatic move, however, South-based cement major Madras Cements has done just that. When Crisil recently downgraded Madras Cements' various debt instruments citing its large debt-funded capital expenditure plans of Rs 1,052 crore, the latter rejected the rating and secured a short-term rating from ICRA, Crisil's competitor in the rating business.

Strangely, there are two interesting aspects to this episode. One, according to the company, the bulk of the borrowings for its Rs 1,052-crore capital expenditure programme is likely to happen only after March 2007. Hence, there may not be any short-term implications on its rating, given the comfortable cash-flows and the strong industry environment. Two, the company had in the past higher interest-bearing debt in its books, but it still enjoyed a high rating by Crisil. For instance, in 2000-01, it had interest- bearing debt of Rs 486 crore compared to about Rs 193 crore as of date.

Krishnan Thiagarajan