India Ratings and Research (Ind-Ra) has upgraded Indo Rama Synthetics (India)  (IRSL) Long-Term Issuer Rating to 'IND BBB+' from 'IND BBB-'. The Outlook is Stable. The outstanding term loans as on Mar. 31, 2021 were at Rs 3.07 billion.

The rating upgrade reflects IRSL demonstrating a swifter turnaround than that expected by Ind-Ra over 2HFY21-FY22. The company reported healthy EBITDA that led to the interest coverage improving to over 4x during 2HFY21, which may normalise to around 2.5x in FY22, compared with around 1.5x expected by the agency. Also, the company's announced capex of Rs 6 billion over FY22-FY24 will eventually improve its business profile though intermittently elevate its debt levels.  

Furthermore, IRSL's parent Indo Rama Ventures Public Company (IVL) has demonstrated increased and committed tangible support towards IRSL by enhancing its one-year/short-term stand-by letter of credit (SBLC) of USD 50 million to a three-year/medium term SBLC of USD 75 million in February 2021 to support IRSL's large scale, capacity and product line enhancement along with an upgradation capex of Rs 6 billion.

Ind-Ra continues to factor in the strong operational and strategic linkages between IRSL and IVL under Ind-Ra’s Parent Subsidiary Linkage criteria. Based on Ind-Ra's assessment of linkages, the agency continues to use a bottom-up approach to rate IRSL, factoring in IVL's increased tangible financial assistance, along with its management, operational and technical support to ensure IRSL's turnaround. Also, IVL's global banking and investor relationships enhance IRSL's overall liquidity and financial flexibility.