Credit rating agency ICRA has re affirmed the long term rating of LAA to the INR 53.97 billion (enhanced from INR 52.55 billion) term loans, INR 6 billion (enhanced from INR 4.51 billion) cash credit facilities, INR 25 billion (enhanced from INR 18.45 billion) non fund based facilities and USD 5.34 million term loans of Jindal Steel & Power.
ICRA has also re affirmed the short term rating of A1+ assigned to the INR 10 billion short term loans of the company. This apart, ICRA has reaffirmed LAA rating assigned to INR 5 billion Non Convertible Debenture program and A1+ rating assigned to INR 5 billion (enhanced from INR 2.75 billion) Commercial Paper Short term debt Program of the company. ICRA also has an LAA rating outstanding for the INR 10 billion NCD program of the company.
The ratings reflect JSPL's competitive cost structure emanating from its integrated operations and access to captive raw materials, its operating efficiencies which, despite a slowdown in the steel industry, have resulted in robust operating profitability with Operating Margins of 33.1% and strong debt servicing indicators as reflected in Net Cash Accruals to Debt of 38% and interest coverage of 9.52 times in FY2009.
Access to captive raw materials, integrated nature of operations, economies of scale, its operating efficiencies and the resultant cost-competitiveness is a protective factor in an industry which is inherently cyclical.
While assigning the ratings, ICRA has also noted the significant capital expenditure plans of its wholly owned subsidiary Jindal Power, however ICRA expects JPL's cash flows to be strong enough to meet its committed equity requirements and future debt repayment obligations. As a result, any future support from JSPL to JPL is not envisaged.
