By Yogesh Pathak

India Ratings and Research (Ind-Ra) has affirmed The Phosphate Company Limited’s (TPCL) Long-Term Issuer Rating at ‘IND BB’. The Outlook is Stable. The instrument-wise rating actions are as follows:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Fund-based working capital limits

-

-

-

INR180

IND BB/Stable

Affirmed

Non-fund-based working capital limits

-

-

-

INR220

IND A4+

Affirmed

Proposed non-convertible debentures (NCDs)

-

-

-

INR100

WD

Withdrawn (the company did not proceed  with the instrument as envisaged)

Proposed non-convertible, redeemable preference shares

-

-

-

INR60

WD

Withdrawn (the company did not proceed with the instrument as envisaged)


KEY RATING DRIVERS

The affirmation reflects TPCL’s continued medium scale of operations, and modest EBITDA margins and credit metrics. In FY18, the company recorded a slight improvement in revenue to INR691.19 million (FY17: INR683.34 million), due to a higher number of orders obtained and executed. Revenue increased further to around INR750 million during FY19. EBITDA margins increased to 11.9% in FY18 (FY17: 11.1%), due to a decline in other operating expenses. In FY18, gross interest coverage (operating EBITDA/net interest expenses) increased to 1.6x (FY17: 1.2x) and net financial leverage (adjusted net debt/operating EBITDA) reduced to 4.5x (5.4x), because of reduced debt. RoCE was 7% in FY18 (FY17: 6%); the margins are modest on volatile raw material prices.

 

The ratings continue to factor in TPCL’s comfortable liquidity position with the average use of fund-based limits being 83.12% at end-March 2019. In FY18, the company’s cash flow from operation deteriorated but remained positive at INR41.49 million (FY17: INR100.83 million). Moreover, cash and cash equivalents stood at INR0.61 million in FY18.

 

The ratings continue to be supported by the promoters’ over six decades of experience in manufacturing fertilisers that have led to longstanding ties with customers and suppliers.


RATING SENSITIVITIES

Negative: Any decline in the profitability leading to any deterioration in the overall credit metrics may lead to a negative rating action.
 

Positive: Any substantial rise in the revenue and any improvement in the overall credit metrics will be positive for the ratings.
 


COMPANY PROFILE

Incorporated in February 1949, TPCL is the oldest single super phosphate manufacturing unit in eastern India. The company commenced commercial production started at Rishra in the Hooghly district of West Bengal in the 1950s. It was founded by the Bangur and Khaitan families, who are accredited with industrialisation in eastern India.

FINANCIAL SUMMARY

 

Particulars

FY18

FY17

Revenue (INR million)

691.19

683.34

Operating EBITDA (INR million)

82.28

76.00

EBITDA margin (%)

11.90

11.12

Interest coverage (x)

1.57

1.22

Net leverage (x)

4.49

5.43

Source: KMI, Ind-Ra




RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

2 May 2018

Issuer rating

Long-term

-

IND BB/Stable

IND BB/Stable

Fund-based working capital limits

Long-term

INR180

IND BB/Stable

IND BB/Stable

Non-fund-based working capital limits

Short-term

INR220

IND A4+

IND A4+

Proposed non-convertible debentures 

Long Term

INR100

WD

Provisional IND BB/Stable

Proposed non-convertible, redeemable preference shares

Long Term

INR60

WD

Provisional IND BB-/Stable



COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity levels of the instruments, please 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.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

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For more information, visit www.indiaratings.co.in.

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Yogesh Pathak

    Analyst
    India Ratings and Research Pvt Ltd Room No. 1201, 12th Floor Om Towers 32, Chowringhee Road Kolkata 700 071
    +91 33 40302519

    Media Relation

    Namita Sharma

    Manager – Corporate Communication
    +91 22 40356121