India Ratings & Research (Ind-Ra) has assigned Prism Cement (PCL) Rs 1,000 million non-convertible debenture (NCD) programme an 'A-' rating. Ind-Ra has also withdrawn the 'A1' rating on PCL's Rs 1,500 million unsecured short-term commercial paper programme as it has been paid in full.
The NCDs have a tenor of five years and the proceeds will be used to refinance both the existing debt and long-term working capital as well as to meet general corporate purposes.
PCL has a strong business profile with a leadership position in cement in central India as well as in tiles, bath and kitchen (TBK) with pan-India presence. These segments together contribute over 85% to its EBITDA. The balance EBITDA share is contributed by the ready mixed concrete (RMC) business. The TBK division was established in 1958 as H & R. Johnson (India) (HRJ). It has been a pioneer in ceramic tiles in India over the past five decades. The RMC division was set up in 1996 as RMC Readymix (India) (RMC). It is a leading readymix concrete manufacturer. Both these companies were amalgamated with PCL in FY10.
Ind-Ra has taken a consolidated view of PCL and its subsidiaries for the ratings.
The company has been taking various measures to address liquidity risks. One of them is monetising its investments in Norcros Plc held through a wholly own subsidiary. Also, the company has raised fresh loans to address its capital expenses, long-term working capital needs and to meet loan maturities over the next 18 months. Ind-Ra opines that liquidity risks remain manageable, given PCL's position as a Rajan Raheja group company and the financial flexibility associated by way of access to bank funding.
PCL's EBITDA interest coverage fell to 0.65x in FY14 and financial leverage increased to 10.8x (5.6x) due to a decline in operating profitability. Ind-Ra expects PCL's credit metrics to improve from FY15 from an overall improvement in operating efficiency and absence of any debt-led capex. However, improved levels would be consistent with the current ratings.
Shares of the company gained Rs 1.1, or 1.5%, to settle at Rs 74.60. The total volume of shares traded was 2,802,182 at the BSE (Friday).
