BWI: Brickwork Ratings Assigns “BWR AAA” for Tata Chemicals Limited’s Unsecured Non Convertible Debenture Issue of INR 250 crore or INR 2.5 billion

Press release from Business Wire India
Source: Brickwork Ratings
Friday, July 31, 2009 05:54 PM IST (12:24 PM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AAA" for Tata Chemicals Limited's Unsecured Non Convertible Debenture Issue of INR 250 crore or INR 2.5 billion
NCD Issue Rating: BWR AAA; Outlook : Stable

Bangalore, Karnataka, India, Friday, July 31, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AAA (Pronounced BWR Triple A) for Tata Chemicals Ltd.'s (TCL) proposed Unsecured Non Convertible Debenture (NCD) Issue of INR 250 crore or INR 2.5 billion of tenure up to 10 years. Brickwork Ratings' 'BWR AAA' stands for an instrument that is considered to offer EXCELLENT credit quality in terms of timely servicing of principal and interest obligations. The rating factored diversified product profile, stable domestic fertiliser business with efficient operations, healthy profitability compared to peers, healthy return on capital, excellent management, and strong and committed Tata group, the promoters.

TCL is one of India's largest producers of inorganic chemicals. It was established in 1939 at Mithapur, by the Tata Group for manufacturing of chemicals and over the years it has expanded its operations into soda ash, edible salt (Tata salt, I-Shakti), Phosphatic fertilisers, urea, cement etc. TCL has its plants in Mithapur in Gujrat, Haldia in WB and Babrala in UP. It has become the world's most geographically spread soda ash company with manufacturing sites spanning four continents (Asia, Africa, North America and Europe).

Performance of Manufacturing Units

TCL, post acquisition of General Chemicals Industries Product Inc., USA (GCIP), in March 2008, is the market leader and the second largest manufacturer of soda ash and the third largest producer of sodium bicarbonate in the world. With the acquisition of GCIP, TCL has global reach and can leverage its position in further improving its performance. The company's domestic market share in manufacture of other chemicals and especially chemicals required for the manufacture of high quality detergents has also improved during the year.

In FY2009 TCL's industrial chemicals segment in India achieved sales of INR 15.38 billion, a growth of 22.56%, as compared to INR 12.55 billion in FY2008. During FY 2009 TCL produced 695,115 tonnes of soda ash domestically and achieved sales of 670,396 tonnes. TCL is the market leader in domestic soda ash business and has a market share of 32%. Its supplies are mainly to the glass industry which in turn has the automobile and the construction industries as major consumers. TCL's global soda ash capacity is 5.5 MTPA with utilization of about 80%.

The fertilizer plant at Babrala increased its capacity from 0.864 MTPA to 1.155 MTPA with an investment of Rs. 208 crore during the year.

Tata salt has been recognized as the most trusted consumer food brand in India. In FY2009 TCL produced highest ever level salt of 534,452 MT compared 500,920 MT in previous year. Tata salt grew by 5% in volumes from 464,522 MT in 2007-08 to 490,025 MT in 2008-09 with the market share of 44.1% while I- Shakti grew by 92% to 151,205 MT in 2008-09.

Subsidiaries and Joint Ventures

In FY 2009 GCIP (a subsidiary) achieved its highest ever gross sales of soda ash of INR 13.22 billion. Similarly Brunner Mond (another subsidiary) achieved sales turnover of INR 14.83 billion registering a growth of 31.94% over previous year and Magadi Soda company's sales (another subsidiary) grew to INR 6.02 billion from INR 3.70 billion in the previous year in the standard ash (SAM) and Premium ash (PAM) segments.

Indo Maroc Phosphore S.A., (IMACID) is a joint-venture company established in Morocco for the purpose of securing supplies of Phosphoric Acid, in which the Company has a 33.33% shareholding.

In 2009 TCL entered into joint-venture agreement with JOil (Singapore), a Jatropha seeding company and holds 33.80% stake.

Financial Performance

TCL has consistently posted strong growth. Company's Net sales (i.e. sales net of excise duty) increased by 103% from INR 59.82 billion in FY2008 to INR 121.53 billion in FY2009. Company's Return on Net worth (RONW) was 15.3% while Return on Capital Employed (ROCE) was 13.1% in FY 2009. Income from operations increased by 103 % to INR 122.57 billion in FY09 as compared to INR 60.23 billion in FY08. Profit from operations increased by 80% to INR 14.36 billion in FY09 as compared to INR 7.96 billion in FY08. An extra-ordinary income of INR 4.87 billion from profit on sale of investments had boosted the Net Profit figures in FY08 to INR 9.64 billion. Excluding this, the company's Net Profit of INR 7.59 billion in FY09 is increasing and in line with the turnover. Interest charges increased by 189% in FY09 mainly due to the acquisition of GCIP.

Outlook

Despite the current economic slowdown, domestic demand for soda ash and chemicals required for manufacture of detergents is expected to be maintained. The demand for fertilizers would also continue to grow. However a key factor which influences the performance of the fertilizer industry is the timely release of the Govt. subsidy and the proportion of cash component thereof. Key factors which will influence TCL's future growth will be maintaining its leadership in the industry by higher efficiency and improving margins. TCL has moderate leverage and healthy return on capital which adds strength to its financials. Its diversified business adds further stability to its overall operations. Combined with the backing of TATA group and excellent management to lead its growth, TCL is expected to remain on course with respect to its performance and debt servicing capacity.

Copyright ©, 2009, Brickwork Ratings.

Brickwork Ratings has assigned the rating based on the information obtained from issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.


CONTACT DETAILS
Mukesh Mahor, Analysts Contact, Brickwork Ratings, Toll free: 1-860-425-2742, mukesh.m@brickworkratings.com
Jubin Pandey, Analysts Contact, Brickwork Ratings, Toll free: 1-860-425-2742, jubin.p@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, Toll free: 1-860-425-2742, media@brickworkratings.com
K N Suvarna, Senior Vice President, Relationship Contact, Brickwork Ratings, Toll free: 1-860-425-2742, kn.suvarna@brickworkratings.com

KEYWORDS
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