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CRISIL has assigned its ‘BB/Stable’ rating to Bala Murugan Chemicals Pvt Ltd’s (BALCHEM’s) bank facilities.
The rating reflect BALCHEM’s exposure to risks related to implementation and stabilization of operations at its upcoming titanium dioxide pigment manufacturing plant and the supplier concentration risks the company faces with respect to its proposed sourcing of ilmenite and sulphuric acid. These rating weaknesses are partially offset by the financial support that BALCHEM gets from its parent, Beach Minerals Company Pvt Ltd (BMC). BALCHEM also benefits from operational synergies with BMC, resulting from vertically integrated operations and proximity to raw material sources.
Outlook: Stable
CRISIL believes that BALCHEM will maintain a stable credit risk profile backed by support from BMC over the medium term. The outlook may be revised to ‘Positive’ if BALCHEM stabilises operations at its upcoming titanium dioxide manufacturing plant and generates more-than-expected revenues and operating margin, thereby improving its financial risk profile significantly. Conversely, the outlook may be revised to ‘Negative’ if BALCHEM delays stabilisation of operations at the upcoming plant and faces cost overruns in the project, resulting in poor margins, or undertakes larger-than-expected debt-funded capital expenditure programme, resulting in deterioration in its financial risk profile.
About the Company
BMC owns 99.7 per cent of BALCHEM’s equity. BALCHEM proposes to manufacture titanium dioxide pigment (anatase form) from ilmenite ore from BMC’s Kuttam mines (near Turicorin in Tamil Nadu). The upcoming plant is expected to have capacity of 15,000 tonnes per annum (tpa); the plant is expected to commence operations in September 2010.
The BMC group, of which BMC is the flagship entity, is promoted by Mr. S. Sukumar and his wife Mrs. Kalaiyarasi; the group comprises 13 companies. BMC is into mining, processing, and exporting of beach minerals. The other group entities are into diverse businesses, such as mining of beach minerals, transportation, shipping, construction aggregates, and kitchen cutlery.
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Analytical Contacts
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CRISIL Rating Desk
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Mitu Samar
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Tanuja Abhinandan
Market Development & Communications
CRISIL Limited
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Email: tabhinandan@crisil.com
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Gurpreet S Chhatwal
Director - CRISIL Ratings
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Email: gchhatwal@crisil.com
Vasudevan R
Head - CRISIL Ratings
Tel: +91-44-6656 3106
Email: rvasudevan@crisil.com
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Email: CRISILratingdesk@crisil.com
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