RATING RATIONALE

RATING RATIONALE

BALAJI AMINES LIMITED

Bank Loan Facilities	Rs. Million	Rating
Cash Credit	600.0	BBB+/Stable (Assigned)
Rupee Term Loan	287.2	BBB+/Stable (Assigned)
Letter of Credit and Bank Guarantee	370.0	P2 (Assigned)

Please refer Annexure for details of the bank loan facilities.

Rating Drivers

Strengths

Established market position in aliphatic amines and their derivatives
Integrated operations with good operating efficiency

Weaknesses

§ Unfavorable capital structure, restricting financial flexibility

§ High vulnerability to volatile raw material prices exerts pressure on margins

§ Moderate liquidity due to highly working capital-intensive operations

Rating sensitivity factors

Adverse movements in raw material prices
High debt-funded capital expenditure (capex)
Introduction of new high-margin products on a continuous basis

Outlook: Stable

CRISIL expects Balaji Amines Ltd (BAL) to maintain its credit risk profile at current levels over the medium to long term. The outlook may be revised to ‘Positive’ if BAL’s financial flexibility improves substantially from current levels. Conversely, any deterioration in the company’s capital structure and liquidity may result in the outlook being revised to ‘Negative’.

Liquidity

BAL has moderate liquidity, supported by good cash accruals and adequate debt protection measures. In 2007-08 (refers to financial year, April 1 to March 31), the company had cash accruals of Rs. 165.5 million, net cash accruals to total debts (NCATD) ratio of 0.2 times, and interest cover of 3.9 times. The company had a low current ratio of 1.17 times as on March 31, 2008 and high utilization of bank lines (about 88 per cent) during 2007-08.

Rationale

BAL, established in 1988, is one of the leading manufacturers of aliphatic amines and their derivatives in India. The major products in its portfolio are Methylamines, Ethylamines, Dimethylamine Hydrochloride, N-methyl-2-pyrrolidone (NMP), Morpholine, Choline chloride, and Dimethyl urea. Amines and their derivatives find application in pharmaceuticals, agrochemicals, paints, rubber chemicals, water treatment, and lube extraction. The company’s manufacturing facility and research and development (R&D) centre are located at Solapur, Maharashtra. The facility is fully equipped with the latest technology like digital computerized controlled systems, which facilitate the control of operations with minimum human interface. The company also has a small manufacturing facility at IDA Bollaram, Hyderabad.