-ICRA cuts ratings on bank facilities of Rama Paper Mills.
7 February 2011 - ICRA on Friday downgraded the long-term ratings on term loans and fund based limits of Rama Paper Mills Ltd (BOM:500357) to LC from LB.
The agency issued the following press release:
Instrument Amount Amount Outstanding Rating
In Crore In Crore As on Jan 11 As on Dec 09 As on Oct 09
Term loans 47.40 33.17 LC LB LBB (Rs. 35.4 crores)
Fund based limits 25.00 - LC LB LBB (Rs. 15 crores)
Non fund based limits 0.40 - A5 A4 A4
ICRA has downgraded the long-term rating outstanding on the Rs. 33.17 crores1 term loans and Rs. 25.00 crores fund-based limits of Rama Paper Mills Limited (RPML) from LB (pronounced L B) to LC (pronounced L C). + ICRA has also downgraded the short-term rating outstanding on the Rs. 0.40 crores non-fund based limits from A4 (pronounced A four) to A5 (pronounced A five).
The rating revision takes into account continued delays in debt servicing by the company over past two years due to stretched liquidity position arising out of time and cost overrun in its completed capacity expansion project and delay in stabilization of the new unit owing to teething problems in the project. The stretched liquidity position is also reflected in frequent overutilization of bank limits, which in turn is attributable to high working capital intensity of its operations on account of high receivable days. While the capital expenditure undertaken by the company during past few years will impart operational advantages, however significant debt raised by the company towards funding of these projects has resulted in weakening of the capital structure (gearing of 2.22 times as on March 2010) and debt coverage indicators. The rating also factors in the RPML's significant concentration in newsprint segment, which apart from witnessing cyclicality in prices on account zero duty protection and global economic cycles, has also been affected by significant imports and fragmented nature of domestic industry. These limitations of RPML are partially offset by the long operating history of the company and expected operational improvement arising out of the projects undertaken by the company in the recent past. Going forward, the company's ability to consistently operate its new capacity at high capacity utilization, improve its contribution margins by keeping its costs under control, and infuse long term funds will remain key rating drivers. While assigning the rating, ICRA has also taken into view the history of the defaults to Financial Institution (FIs) and waivers taken by FIs as a part of One Time Settlement (OTS) scheme, when it was under the purview of BIFR during 2000-06.
Rama Paper Mills Limited (RPML), which is in the business of manufacturing and selling of paper and board related products was established in December 1985 at Kiratpur, (District Bijnor, Uttar Pradesh). The company has been promoted by Mr. Pramod Agarwal and his brother Mr. Arun Goel, who are professionally qualified. While RPML started off with an initial installed capacity of 3300 Metric Ton (MT); over the years, the company has increased its installed capacity to 60,320 MT with capacity additions and modernization of existing lines. With four production lines, RPML has a presence in product segments such as Newsprint, creamwove paper, duplex board and poster paper; however currently the production is largely dominated by newsprint segment (more than 85%). The company reported an operating income (OI) of Rs 109.10 crores and a Profit after Tax (PAT) of Rs 0.01 crores during FY 2010 as against an OI of Rs 106.99 crores and a PAT of Rs 2.90 crores in FY 2009.
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|Publication:||M2 Banking & Credit News (BCN)|
|Date:||Feb 7, 2011|
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