MUMBAI, MAY 23: Text of Fitch press release onlong-term rating of Mihijam Vanaspati Ltd. Fitch Downgrades Mihijam Vanaspati to 'B(ind)'; Outlook Negative Fitch Ratings-Kolkata/Singapore-23 May 2011: Fitch Ratings has downgraded India-based Mihijam Vanaspati Ltd.'s (MVL) National Long-Term rating to 'B(ind)' from 'B+(ind)'. The Outlook is Negative. The agency has also taken the following actions on MVL bank loans: - INR85m fund based limits: downgraded to 'B(ind)' from 'B+(ind)'; and - INR100m non-fund based limits: affirmed at 'F4(ind)'. The downgrade reflects the weakening of MVL's financial metrics in FY10, with a decline in its EBITDA margins to 1.95% (FY09: 3.40%), an increase in its net leverage (net debt/EBITDA) to 9.97x (FY09: 4.6x) and a dip in its interest coverage to below 1.0x (FY10: 0.92x; FY09: 1.2x). The ratings remain constrained by the company's small scale of operations, fluctuations in raw materials prices, its limitations on raising additional equity and geographical concentration risk, which limits MVL's market reach to the state of Jharkhand. The Negative Outlook reflects Fitch's expectations of MVL's weaker credit profile for FY11-FY12 based on its increased leverage and low margins. Fitch notes that the company has undertaken a substantial renovation of its manufacturing facilities, which resulted in a significant increase in debts during FY11. Based on the provisional numbers provided for FY11, the agency expects MVL's net leverage to remain high at 7.81x, with low interest coverage of 1.6x and a slight improvement in its EBIDTA margins to 2.7%. The ratings derive limited benefit from the absence of any long-term liabilities in MVL's books and the experience of its promoters in crude palm oil trading. Negative rating factors include MVL's net debt/EBIDTA exceeding 7.5x on a sustained basis. Conversely, a sustained net debt/EBITDA of below 6.0x would be positive for its ratings. MVL manufactures and sells vanaspati ghee and refined oil in the state of Jharkhand. It has established brands "Mamta" and "Cherry" in the local markets, which helps in the direct marketing of end products. The company was acquired by the Rajesh Auto Group in 2008. In FY10, MVL reported a gross turnover of INR728.8m (FY09: INR673.2m) along with an operating EBIDTA of INR14.2m (FY09: INR22.9m) and a net income of INR3.7m (FY09: INR1.1m). Compiled by Abhijeet SawantPhone: +91 (22) 66497000. feedback@tickerplantindia.com Copyright (c) TickerPlant Ltd.
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