CRISIL lifts ratings on Jindal Poly Films to AA-/P1+.
BANKING AND CREDIT NEWS-15 July 2010-CRISIL lifts ratings on Jindal Poly Films to AA-/P1+(C)1994-2010 M2 COMMUNICATIONS http://www.m2.com
15 July 2010 - Indian credit rating agency CRISIL lifted yesterday to AA- from A+ and to P1+ from P1 the ratings on the long- and short-term bank facilities, and the commercial paper programme of local Jindal Poly Films Ltd (BOM:500227).
The outlook on the long-term bank facilities remains "stable".
The upgrade reflects CRISILA[cent sign]a'[not sign]a"[cent sign]s belief that the company will consolidate its market leadership further by commissioning its new capacities for both its biaxially-oriented polyethylene terephthalate (BOPET) and biaxially-oriented polypropylene (BOPP) business divisions. Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s capacity utilisation level is expected to increase because of the expected healthy growth in demand for BOPP and BOPET products. Enhanced market position is also supported by higher operating efficiencies; as Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s lower cost of production compared to that of its peers, will continue to improve the companyA[cent sign]a'[not sign]a"[cent sign]s business risk profile.
The upgrade also reflects Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s improved financial risk profile marked by a large net worth, healthy debt protection metrics and low gearing of 0.43 times as on 31 March 2010. The financial risk profile has strengthened, despite share buybacks in the past, because of higher profitability and accretion to reserves. Although Jindal Poly has announced additional buybacks and debt-funded capital expenditure (capex) plans for the medium term, CRISIL believes that the company will maintain its robust financial risk profile, supported by its large cash accruals.
The ratings continue to reflect Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s strong presence in the flexible packaging market in India, and its firm foothold in the export markets. The ratings also reflect the companyA[cent sign]a'[not sign]a"[cent sign]s robust operating efficiency, driven by economies of scale and strong liquidity. These rating strengths are partially offset by the commoditised nature of the packaging industry, and the risks arising from Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s debt-funded capex plans, involving implementation of fresh capacities in the packaging business division and investments in power projects through subsidiaries.
CRISIL believes that Jindal Poly will maintain its market leadership and high operating efficiencies over the medium-term. Jindal PolyA[cent sign]a'[not sign]a"[cent sign]s financial risk profile is also likely to remain strong, supported by robust debt protection metrics; its gearing, though, is expected to increase marginally. The agency may revise the outlook to "positive" if Jindal Poly generates more-than-expected cash accruals, thereby improving its capital structure and maintaining its strong debt protection metrics. Conversely, it may revise it to "negative" in case the company makes invests more-than-expected investments in power projects, undertakes more-than-expected debt-funded capex, or is faced with decline in operating margin.
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