By Chandan Sharma

India Ratings and Research (Ind-Ra) has downgraded Ballarpur Industries Limited’s (BILT) Long-Term Issuer Rating to ‘IND D from ‘IND BBB-’ while resolving the Rating Watch Negative (RWN). The instrument-wise rating actions are given below:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating

Rating Action

Term loans

-

-

-

INR490

IND D

Downgraded

Fund-based and Non-fund-based working capital limits

-

-

-

INR7,520

IND D/IND D

Downgraded

Non-convertible  debenture (NCDs)

-

-

-

INR5,000

IND C

Downgraded

Commercial paper

-

-

-

INR2,470

IND C

Downgraded

KEY RATING DRIVERS

The downgrade reflects delays in debt servicing by the company. BILT continues to face delays in the necessary deleveraging, as efforts to monetise its assets have not fructified within planned timelines. The company has also been unable to refinance its debt or elongate the maturity profile of its near-term debt obligations fully. 

Cash flows veer reduced its ability to fund debt obligations through internal accruals, creating an immediate need for refinancing. In 9MFY17, BILT reported consolidated revenue of INR16.9 billion (down 44.8%
yoy) and consolidated EBITDA losses of INR744 million (INR5.6 billion) with net loss of INR9,037 million (negative INR781 million). BILT reported EBIT margin of negative 12.1% in 9MFY17 in the key paper segment (9MFY16: 16.1%). 

According to the management, BILT raised working capital limits of INR500 million in January 2017, due to which capacity utilisation has improved at its existing facilities. However, it will require significant deleveraging through asset sales to improve the credit profile. At FYE16, BILT had a consolidated balance sheet debt of around INR72.3 billion (excluding perpetual bonds). According to the management, it is in the advanced stages of raising more working capital lines for operations as well as equity and debt infusion through asset sales. 

In FY16, BILT reported consolidated revenue of INR42.7 billion (FY15: INR32.4 billion; FY14: INR52.8 billion) and EBITDA margin of 16.6% (21%; 17.8%). The company has classified its subsidiary Sabah Forest Industries as discontinued operations for FY15 and FY16, which resulted in lower revenue and higher EBITDA margins for these years when compared with FY14 financials.

Ind-Ra continues to take a consolidated view of BILT’s business and financial profiles for the ratings. BILT Graphic Paper Products Limited (
IND D) has strong operational and strategic linkages with its ultimate parent, BILT, due to their similar business profiles, common treasury and management team.


RATING SENSITIVITIES

Positive: Timely debt servicing for at least three consecutive months could result in a positive rating action.

Negative: Delay in servicing of NCD and 
commercial paper obligations would lead to a negative rating action on the instruments. 


COMPANY PROFILE

BILT, on a consolidated basis, has one production facility in Malaysia and six production facilities across India, of which Ballarpur, Bhigwan, Sewa and Ashti units are under BILT Graphic Paper Products, while Kamplapuram and Shree Gopal units are under BILT. Overall, the company has a paper capacity of around 1 million MT and a pulp capacity of around 0.8 million MT (including rayon grade pulp capacity).


RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Amount Outstanding (million)

Rating

30 December 2016

29 September 2015

28 November 2013

Issuer rating

Long term

-

IND D

IND BBB-/RWN

IND A+/RWE

IND A+/Stable

Term loans

Long term

INR490

IND D

IND BBB-/RWN

IND A+/RWE

Fund-based and non-fund-based working capital limits

Long term/Short term

INR7,520

IND D

IND BBB-/IND A3/RWN

IND A+/IND A1+/RWE

IND A+/IND A1+

NCDs


INR5,000

IND C

IND BBB-/RWN

IND A+/RWE

IND A+

Long term

Commercial paper

 

INR2,470

IND C

IND A3/RWN

IND A1+/RWE

IND A1+

Short term


COMPLEXITY LEVEL OF INSTRUMENTS

Bank facilities, NCDs and CPs are instruments with low complexity levels, where the relationship between the inherent risk factors and intrinsic return characteristics is straightforward. 

For more information, visit
https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

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Analyst Names

  • Primary Analyst

    Chandan Sharma

    Associate Director
    India Ratings and Research Pvt Ltd 601-9 Prakashdeep Building 7 Tolstoy Marg New Delhi 110001
    +91 11 43567256

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121