CRISIL downgrades Indira Industries' ratings

(ADPnews) - Dec 30, 2010 - CRISIL on Wednesday lowered its ratings on the bank facilities of Indira Industries to BBB/negative/P3+ from BBB+/stable/P2.

The agency issued the following press release:

Rs.60 Million Cash Credit Limits* BBB/ Negative (Downgraded from ‘BBB+/Stable’)
Rs.20 Million Proposed Long-Term Bank Loan Facility BBB/ Negative (Downgraded from ‘BBB+/Stable’)
Rs.130 Million Packing Credit Limit * P3+ (Downgraded from ‘P2’)
Rs.50 Million Foreign Bills Discounting Limit* P3+ (Downgraded from ‘P2’)
Rs.140 Million Bank Guarantee P3+ (Downgraded from ‘P2’)
* Full interchangeability among the limits

CRISIL has downgraded its ratings on the bank facilities of Indira Industries to ‘BBB/Negative/P3+’ from ‘BBB+/Stable/P2’.

The downgrade reflects a significant deterioration in Indira Industries’ business and financial risk profiles following a decline in sales because of cancellation of orders by Indira Industries’ key clients, GE Energy Products France SNC (GEEPFSNC) and GE’s Italian subsidiary, Nuovo Pignone SPA, and reduction in net worth because of sizeable withdrawal of capital by the partners. Indira Industries derived around 75 per cent of its total revenues in 2008-09 (refers to financial year, April 1 to March 31) from GEEPFSNC and Nuovo Pignone SPA. The revenues from these entities during 2009-10 declined significantly and there are no sales to these entities during 2010-11 till date. Indira Industries’ revenues declined to Rs.773.2 million in 2009-10 from Rs.1.4 billion in 2008-09, and to less than Rs.100 million in the first half of 2010-11; Indira Industries generates a large part of its revenues in the second half of the year. Consequently, the firm’s operating profitability has also deteriorated significantly to 22.5 per cent from a historic average of more than 30 per cent. Furthermore, Indira Industries’ net worth significantly reduced to Rs.353.1 million as on March 31, 2010 from Rs.733.6 million as on March 31, 2009 because of sizeable withdrawal of partners’ capital of around Rs.530 million during 2009-10.

The ratings reflect the extensive experience of Indira Industries’ promoters in the industrial noise control business, the benefits that the firm derives from its technical collaboration with G+H Schallschutz GmBH, Germany, and its sound financial risk profile marked by a comfortable capital structure. These rating strengths are partially offset by the customer concentration in Indira Industries’ revenue profile, and the firm’s susceptibility to volatility in raw material prices.

Outlook: Negative
CRISIL believes that Indira Industries’ credit risk profile could come under pressure because of the continued pressure on its revenues and profitability. The ratings may be downgraded if Indira Industries revenues and profitability do not improve to the anticipated levels or if the firm’s net worth reduces further because of sizeable capital withdrawn by the partners. Conversely, the outlook may be revised to ‘Stable’ if Indira Industries can expand its customer profile leading to more-than-expected revenues and profitability, while maintaining its net worth and debt protection metrics at comfortable levels.

About the Firm
Indira Industries was set up as a partnership firm in 1987 by Mr. K Ponnuswamy and his family. The firm manufactures industrial noise control systems in technical collaboration with G+H Schallschutz GmbH, Germany. Indira Industries’ manufacturing facilities are in Ranipet (Tamil Nadu). Its product range consists of air-filter systems, intake and exhaust systems, silencers, dampers, acoustic enclosures, and heat recovery steam generator casings supplied mainly for power projects. The company also caters to Indian Railways. Mr. P Manikandan, son of Mr. K Ponnuswamy, retired as partner of the firm on April 1, 2009.

Indira Industries reported, on provisional basis, a profit after tax (PAT) of Rs.149.30 million on an operating income of Rs.703.40 million for 2009-10; the firm reported a PAT of Rs.636.20 million on net sales of Rs.1.34 billion for 2008-09.

(INR 100 = USD 2.227/EUR 1.681)

Rating agency website: www.crisil.com

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