CRISIL has assigned its rating of ‘AA-(so)/Stable’ to STL Fertilisers Pvt Ltd’s (SFPL’s) Rs.1350 million non-convertible debenture (NCD) issue backed by put option receivables from Krishak Bharati Co-operative Ltd (KRIBHCO, rated ‘AA-/Stable/P1+’ by CRISIL). The rating is based on the credit quality of KRIBHCO.

KRIBHCO has extended an irrevocable put option in favour of SFPL for the equity stake of 15 per cent held by SFPL in Kribhco Shyam Fertilisers Ltd (KSFL). The put option is valid till March 31, 2012. SFPL would issue non-convertible debentures of face value aggregating Rs.1350 million for a scheduled tenure of two years against the put option receivables.

Outlook: Stable
CRISIL expects KRIBHCO’s cash flows from the core fertiliser operations to remain constrained until the de-bottlenecking and energy efficiency project is commissioned. CRISIL also expects a decline in the society’s liquid investments over the medium term, given the large planned capital expenditure (capex) and additional investments in Kribhco Shyam Fertilisers Ltd (KSFL). KRIBHCO’s healthy financial risk profile and strong financial flexibility, backed by steady cash flows from investments, will nevertheless continue to support the rating. The outlook could be revised to ‘Positive’ if the de-bottlenecking and energy efficiency project is commissioned on schedule or in case of a favourable change in the government policy. Conversely, the outlook could be revised to ‘Negative’ in case the society undertakes larger-than-anticipated debt for its capex or if there is an increase in its operating losses from the core fertiliser operations or a decline in cash flows from investments.

About KRIBHCO
KRIBHCO was promoted in 1980 by the Government of India. The society manufactures fertilisers (including bio-fertilisers) and processes seeds. KRIBHCO’s first plant, commissioned in March 1985 in Hazira, Gujarat, has capacity to manufacture 1.73 million tonnes per annum (tpa) of urea and 1 million tpa of ammonia. Its first bio-fertiliser plant was commissioned in the late 1990s; it now has capacity to manufacture 550 tpa of bio-fertilisers. KRIBHCO is implementing a de-bottlenecking and energy efficiency project at the Hazira plant, which will help increase urea capacity by 27 per cent and reduce energy consumption by 5 per cent. The project, expected to be completed by September 2011, will cost around Rs.13 billion.

KRIBHCO reported a profit after tax (PAT) of Rs.2.5 billion for 2008-09 (refers to financial year, April 1 to March 31) on net sales of Rs.25.59 billion, on a standalone basis, as against a PAT of Rs.2.09 billion and net sales of Rs.22.30 billion, respectively, for the previous year.