India Ratings & Research (Ind-Ra) has affirmed Coromandel International (CIL) long-term issuer rating at 'AA+'. The outlook is stable.
The affirmation follows the moderation in CIL's net adjusted leverage to 0.8x in FY14 (year end March), after it peaked to 1.9x in FY13 (FY12: 0.6x). Consolidated revenue grew to Rs 100.5 billion in FY14 and EBITDA margins moderated to 8%. Also, working capital debt reduced to Rs 14 billion in FY14 due to the shortening of the working capital cycle to 26 days (38 days; 32 days) and a fall in subsidy receivables due to the government's downward revision of subsidy under the Nutrient Based Subsidy Policy and their timely disbursement. The higher leverage in FY13 was due to the issuance of INR4.0bn bonus redeemable debentures, which were classified as debt and paid out in FY14. The financial leverage has been calculated after netting off free cash and subsidy receivables.
The ratings reflect CIL's position as one of India’s largest phosphatic fertiliser manufactures, assured raw material supplies through long-term relationship with suppliers and backward integration to produce phosphoric acid, which is one of the key raw materials. The company has a strong marketing and retail network with 690 retail stores spread across various Indian states.
The company's market position is reinforced by the increase in its capacity for phosphatic fertilisers to 3.625mmtpa post completion of a new plant in Kakinada, when the country is facing a demand-supply mismatch. India meets about 50% of its phosphatic and complex fertiliser demand through imports. The completion of the new phosphoric acid plant in Tunisia would provide adequate supply of raw material (phosphoric acid) for the expanded capacity, which would be sufficient to meet about 18%-20% of CIL's overall phosphoric acid requirements.
The ratings also reflect CIL's diversified product portfolio, increased geographic reach through the acquisition of companies having presence in the northern and western region of India and its own large presence in southern India. The acquisition of Sabero Organics Gujarat has improved CIL's crop protection product portfolio, while the acquisition of Liberty Phosphate has helped it improve its market penetration for single super phosphate.
Shares of the company declined Rs 0.05, or 0.02%, to trade at Rs 314.45. The total volume of shares traded was 140 at the BSE (10 a.m., Friday).
