CARE rates Combustion Systems bank lines at BBB/PR3

(ADPnews) - Nov 5, 2010 - CARE on Thursday gave its BBB/PR3 ratings to the INR-140-million bank facilities of Combustion Systems Ltd.

The agency issued the following press release:

Facilities Amount (Rs. crore) Ratings1 Remarks
Long-term Bank Facilities 5 ‘CARE BBB’ (Triple B) Assigned
Short-term Bank Facilities 9 ‘PR3’ [PR Three] Assigned
Total 14

Rating Rationale
The rating derives strength from CBL’s track record in execution of orders, significant experience of the promoters in the line of activity, technical collaboration with M/s. Coen Co. Inc. (CCI), which is a leader in the field of industrial burners and combustion equipment, comfortable gearing ratios, healthy order book position and repeat orders received from the existing clients.
The rating is however, constrained by decline in revenue in the past few years, exposure to raw-material price fluctuation as the orders are fixed-price contracts, high receivable days, relatively small size of operations and risks associated with project execution.
The assigned ratings are also constrained due to the likely challenges CBL could face post divestment of stake by the main technology supplier CCI, in terms of establishing itself and securing approvals as an approved supplier from various consultants and Original Equipment Manufacturers (OEMs).
The ability of CBL to maintain healthy order book, achieve envisaged revenue and profits and improve its overall working capital cycle are the key rating sensitivities.

Company Profile
CBL is engaged in manufacture of industrial burners and combustion equipment. CBL (erstwhile Coen Bharat Ltd.) was established in 1981, as an Indo-American joint venture company. CCI, the American partner held 57% equity in the joint venture. Post divestment in July 2010, the entire shareholding is with the Indian promoters of CBL.
CBL registered a PAT of Rs.1.21 crore on total income of Rs.18.97 crore in FY10 as against a PAT of Rs.0.62 crore on total income of Rs.26.45 crore in FY09.

(INR 100 = USD 2.262/EUR 1.592)
(crore = 10 million)

Rating agency website: www.careratings.com

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