India Glycols affirmed at 'Fitch BBB+(ind)'; outlook stable

3570 Investors following India Glycols. Share this News with them.

0

Like this story, share it with millions of investors on M3

India Glycols affirmed at 'Fitch BBB+(ind)'; outlook stable

Fitch Ratings has affirmed India Glycols Limited's (IGL) National Long-Term rating at 'Fitch BBB+(ind)'. The Outlook is Stable.

Post your opinion here

 

0

Tweet

Share on Tumblr

India Glycols BSE | NSE 01/06/12 Are Mutual Funds betting on India Glycols?

Fitch Ratings has affirmed India Glycols Limited's (IGL) National Long-Term rating at 'Fitch BBB+(ind)'. The Outlook is Stable.

Fitch Ratings-New Delhi/Singapore-07 September 2011: Fitch Ratings has affirmed India Glycols Limited's (IGL) National Long-Term rating at 'Fitch BBB+(ind)'. The Outlook is Stable. A full rating breakdown is provided at the end of this commentary.

The ratings reflect IGL's established position in the Indian market as a producer of mono ethylene glycol (MEG) and ethylene oxide derivatives (EOD) and its improved financial performance in the financial year ended March 2011 and Q1FY12. The ratings further reflect IGL's varied product offerings from its EOD segment, increasing sales of MEG (as bio-MEG under cost-plus contracts) and its flexibility in switching between molasses and ethyl alcohol as a raw material, depending on viability. MEG sales under cost-plus contracts accounted for around 40% and 80% of total sales in FY11 and Q1FY12, respectively.

IGL's ratings are, however, constrained by its working capital intensity, volatile profitability due to the commoditised nature of its products and raw material price fluctuation. However, Fitch notes that the company is increasingly focusing on bio-MEG and value added products. The ratings are also constrained by low consolidated profitability due to high operating losses at its subsidiary - Shakumbari Sugar and Allied Industries Limited (SSAIL), which IGL acquired in FY08 with a view to backward integration. The losses at SSAIL are attributed to low capacity utilisation as a result of lack of sugar cane availability in proximity of the mill.

Consolidated revenue grew 44% yoy to INR17.3bn in FY11 with the operating EBITDA margin improving to around 9% (FY10: 6.8%) due to the recovery of MEG and EOD prices and increase in sales of MEG under cost-plus contracts. Consolidated net financial leverage (total adjusted net debt /operating EBITDA) also improved significantly but remained high at around 10x in FY11 (FY10: 16x). In Q1FY12, consolidated performance improved due to improved standalone performance and also smaller losses in SSAIL. On a standalone basis, revenues of around INR6.3bn with operating EBITDA margin of 13% during the same period.

Fitch also notes that IGL has significant debt repayments due in FY12 (around INR2bn), but given its established relationship with its bankers, the company should be able to refinance successfully as it has in the past. Fitch expects IGL's operating performance to further improve and financial leverage to reduce in FY12 with its increased focus on bio-MEG and EODs.

A rating upgrade may result from further improvement in operating profitability at the consolidated level leading to reduced consolidated net financial leverage on a sustained basis. Conversely, inability to reduce consolidated net financial leverage on a sustained basis would act as a negative rating guideline.
India Glycols commenced operations in 1983 as a MEG manufacturer and now manufactures green technology-based bulk, specialty and performance chemicals and natural gums, spirits, industrial gases, sugar and nutraceuticals. Its product offerings include glycols, ethoxylates, glycol ethers and acetates, and various performance chemicals catering to a number of industries.

IGL's ratings:
- INR6,018.9m long-term loans (reduced from INR6,433.1m) affirmed at 'Fitch BBB+(ind)'
-INR3,750m fund-based limits (increased from INR3,000m) affirmed at 'Fitch BBB+(ind)'/'Fitch A2(ind)'
- INR7,000m non-fund based limits (increased from INR4,750m) affirmed at 'Fitch A2(ind)'

FIIs holding more than 30% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment