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-CRISIL rates cash credits of CIBI International at B-.

BANKING AND CREDIT NEWS-March 2, 2011--CRISIL rates cash credits of CIBI International at B-(C)2011 M2 COMMUNICATIONS

2 March 2011 - Indian rating agency CRISIL yesterday assigned a B-/"stable" rating to a cash credit and a proposed cash credit facility of CIBI International, while rating a bank guarantee of the company at P4.

The agency issued the following press release:

Rs.100 Million Cash Credit B-/Stable (Assigned)

Rs.50 Million Proposed Cash Credit Facility B-/Stable (Assigned)

Rs.4 Million Bank Guarantee P4 (Assigned)

CRISIL has assigned its 'B-/Stable/P4' ratings to the bank loan facilities of CIBI International (CIBI; part of the Lakshmivel group). The ratings reflect customer concentration in the Lakshmivel group's revenue profile and the susceptibility of its margins to volatility in raw material prices. Furthermore, there are instances of delay by group company Sri Hari Process (Sri Hari) in servicing its debt (facility not rated by CRISIL). These weaknesses are partially offset by the Lakshmivel group's established presence across the value chain in the textile sector and its moderate financial risk profile, marked by moderate gearing and adequate liquidity.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Sri Gugan Pvt Limited (Gugan), Lakshmivel Mills Pvt Limited, Sri Hari, and CIBI, together referred to as the Lakshmivel group. This is because all the companies are engaged in the textile value chain, and share common management. Also, the companies share close business synergy and have inter-company commercial transactions, a centralised system for procurement of raw materials, and marketing arrangements.

Outlook: Stable

CRISIL believes that Lakshmivel group will maintain a stable business risk profile over the medium term, supported by its established market presence and sizeable order book. The outlook may be revised to 'Positive' if there is an improvement in the group's cash accruals along with a diversification in its revenue profile. Conversely, the outlook may be revised to 'Negative' if the company undertakes more-than-expected, large, debt-funded capex programme, or report significantly lower cash accruals due to fall in order book or operating margin.

About the Group

The Lakshmivel group was set up in 1991 by Mr. G. Sakthivel and his wife Mrs. S. Punithavathi. The group's operations span the entire value chain of the textile business. LMPL was set up in 2006; it manufactures cotton yarn, primarily for Gugan and CIBI. LMPL has a capacity of 12,000 spindles. CIBI, the group's flagship entity, manufactures knitted garments. Sri Hari, a proprietary concern, undertakes activities such as washing, compacting, embroidery, printing, and other processes in the textile value chain. Gugan was set up in 1999; it manufactures fabric and has capacity to produce around 100 tonnes of fabric per day. The group has three windmills with an aggregate capacity of 1.75 mega watts.

The Lakshmivel group reported a profit after tax (PAT) of Rs.92.5 million on net sales of Rs.3.72 billion for 2009-10 (refers to financial year, April 1 to March 31), against a PAT of Rs.8.8 million on net sales of Rs.3.06 billion for 2008-09.

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Publication:M2 Banking & Credit News (BCN)
Date:Mar 2, 2011
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