Rating downgrade on basis of earlier financial position: Ess Dee

CARE Ratings has downgraded its rating on Ess Dee Aluminium to ‘care D’ on back of delays in debt servicing. The ‘care D’ rating is assigned to those companies that are in default or are expected to default soon. The rating agency says that delays have been due to strained liquidity position of the company. Ess Dee has eight lenders in total of which State Bank of India is leading. Speaking to CNBC-TV18, Sudip Datta, Chairman of the company says that the rating agency has assigned rating on basis of balance sheet upto March 31, 2015 when certain repayments were delayed. Post that, payments have been regular, he adds. The lead bankers have submitted a letter mentioning that payments, since then, have been standard, he says adding that the company has not defaulted in interest payment.Datta added that the company has cleared its debts upto December 31, 2015 and have informed exchanges about the same. On rumours of a possible takeover, Datta refused to comment.Below is the verbatim transcript of Sudip Dutta’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Ekta: If you could just clarify that what you have heard from CARE with regards to your rating and I do understand that there were some clarifications as well from the management on the same? A: The thing is that CARE has actually downgraded its rating on the basis of the March 31 Balance Sheet. March 31 - certain repayment was delayed by few days, for that they have downgraded the rating. That is why we gave the clarification from my lead bankers, on behalf of all the bankers they say that everything as per the December 31 is standard, nothing is delayed; everything was happened. However, it was on the basis of March 31 2015 balance sheet. Anuj: Have things improved in the current financial year in that case if this based on the March 31 balance sheet?A: That is why the bank has given the letter. It has improved and that is why it is giving the letter. Anuj: One more thing that I want to discuss. There is lot of buzz on the street about a possible sellout and the name being mentioned is Australia-based Amcor and even the amount being mentioned is Rs 2,000 crore. What is your clarification on that? A: Today, in the pharmaceutical packaging space there are few companies available in the world and whoever is available, they are too big. That is why for last three years, if you see, there are a lot of rumours going on in the market because whenever this type of a big giant enters into any of the country, they try to take over the small company - our type of company.Ekta: Are you in talks or have you been approached? A: I cannot comment on this, but if you see for last 15 years of their track record they have never done any type of organic growth. They always do the inorganic way. Ekta: If they approach you, would you be willing to sell?A: One year back, we have done collaboration with government of Germany affiliated Chemnitz University to get this technology and do this thing. Yes, there is a lot of interest into international market but currently I cannot comment on this. Anuj: Can you give us some data, which supports your view that what CARE did was for till March 31 and since then things have improved, can you give us any data to support that? A: The data if you see, we have already given the data that around Rs 500 crore plus we have debt and whatever debt we have, everything is on line and repaid up to December 31. Ekta: There is no default in your interest payments and that would account to around Rs 27 crore for three months that would be in your previous quarter? A: Yes, right.Ekta: Who is your lead lender, I understand it is State Bank of India (SBI), you have spoken to them?A: SBI. Ekta: How many other lenders do you have in the company? A: It is around eight.Ekta: I just had some clarification because the financials of the company don’t match up according to me. For example, the revenue was down around 41 percent in the previous quarter, your net loss recorded was around Rs 15.4 crore, your finance cost were up around 53 percent so there can be an assumption that there could be some stress on the balance sheet at this point in time considering you have a long of Rs 500 crore. So, how exactly are you managing to service your debt? Are your fundamentals or is your business managing to match up to the required interest payments per month? A: In 2014, we had done collaboration between Chemnitz University, which is part of the government of Germany, for technology tie-up and we have invested that money to upgrade our technology and supplying to the international market. Today, if you see the international market, aluminum foil for the pharmaceutical packaging is selling at the rate of around 12-14 euro and we are selling at USD 6-8. So, after upgradation, we have already tied-up to supply to that areas and if you see that is basically because of that the project is not yet completed. Within six months time, when it is completed, then it will be into different orbit altogether. Ekta: When will that happen, when will you see a recovery in your numbers, when will you turn into the black? A: It will turn black on March 31 only, but if you see into the totally different number from the June 30 2016 after completion of the project. Anuj: Do you have any sense of where you will be seeing profit, from here on what would be the first quarter of profit that you say that you have reasonable sort of surety of in terms of reporting your first quarter of profit?A: Today, we are doing around USD 6-8 which has increased to USD 12-14. If I see that my gross profit will be around USD 5-6 per kg which is a USD 5,000 per tonne. If I do that 25,000-30,000 tonne, you understand how big it will be.Ekta: 53 percent rise in your finance costs, what led to that and do you expect to possibly see a further rise in maybe working capital in order to sustain your cash flows going forward or your fundamentals business?A: The revenue is not yet started coming, it will start coming from month of June. You will be able to see that time the percent comes down and we are already in talk with my international company - they have agreed for advances which can able to cut down my lot of debt.