March 09, 2016
Jindal Steel and Power Limited
Ratings downgraded to 'CRISIL D/CRISIL D' ; Ratings removed from 'watch negative'
Total Bank Loan Facilities Rated Rs.326380 Million
Long Term Rating CRISIL D (Downgraded from 'CRISIL BB+'; removed from 'Rating Watch with Negative Implications')
Short Term Rating CRISIL D (Downgraded from 'CRISIL A4+'; removed from 'Rating Watch with Negative Implications')
(Refer to Annexure 1 for Facility-wise details)
Rs.32.12 Billion Non Convertible Debentures CRISIL D (Downgraded from 'CRISIL BB+'; removed from 'Rating Watch with Negative Implications')
Rs.41.5 Billion Commercial Paper CRISIL D (Downgraded from 'CRISIL A4+'; removed from 'Rating Watch with Negative Implications')

CRISIL has downgraded its ratings on the bank facilities and debt programmes of Jindal Steel and Power Ltd (JSPL; part of the JSPL group) to 'CRISIL D/CRISIL D' from 'CRISIL BB+/CRISIL A4+'; the ratings have been removed from 'Watch with Negative Implications'.
The rating downgrade reflects delays by JSPL in payment of interest on its term loans; the delays were due to weakened liquidity. Liquidity deteriorated significantly as the steep fall in steel realisations coincided with high debt repayment obligations. Pressure on liquidity intensified further due to delays in materialisation of asset monetisation plans and refinancing of debt.  
JSPL's steel business remains vulnerable to volatility in demand and in prices of metal, while its power business is susceptible to demand and price volatility in the merchant market and lack of raw material integration. The group is also exposed to risks related to regulatory changes in the mining sector. However, it has a healthy market position in the steel industry, value-added product profile, and proximity to raw material sources. Successful debt refinancing and asset monetisation will be critical for the group and will assist in tiding over the current liquidity constraint.
For arriving at its ratings, CRISIL has combined the business and financial risk profiles of JSPL and its subsidiaries. This is because all these entities, collectively referred to herein as the JSPL group, have operational and financial linkages.

About the Group

The JSPL group, part of the diversified OP Jindal group, is one of India's key steel producers, and has a presence in power generation and mining. The group has an installed capacity of 6.75 million tonnes per annum (mtpa) of steel: 3.25 mtpa at Raigarh, Chhattisgarh; 1.50 mtpa in Angul; and 2.00 mtpa in Oman.

Jindal Power Ltd (JPL), a subsidiary of JSPL, currently has a total commissioned power capacity of 2800 megawatts (MW), with another 600 MW being synchronised. Through its fully owned subsidiary, Jindal Steel & Power (Mauritius) Ltd (JSPML), JSPL acquired Shadeed Iron & Steel Company in Oman, which has a 1.5-mtpa gas-based hot-briquetted iron plant; the plant is forward-integrated to manufacture 2.0 mtpa of finished products. The group's international operations include interests in mining assets in resource-rich locations such as Australia, Indonesia, Mozambique, and South Africa.

On a consolidated basis, the JSPL group had a net loss of Rs.12.8 billion (after accounting for exceptional expense of Rs.18.55 billion paid as an additional levy on the order of the Supreme Court of India) on an operating income of Rs.194.0 billion for 2014-15 (refers to financial year, April 1 to March 31), against a profit after tax (PAT) of Rs.18.9 billion on an operating income of Rs.192.86 billion for 2013-14. The group had a net loss of Rs.16.35 billion (after accounting for provision of Rs.2.27 billion for impairment loss of fixed assets in its overseas subsidiary in Australia and foreign exchange variation loss of Rs.1.22 billion) on an operating income of Rs.135.38 billion for the nine months ended December 31, 2015. Against this, it had a net loss of Rs.7.58 billion (after accounting for exceptional expense of Rs.18.55 billion paid as an additional levy on the order of the Supreme Court of India) on an operating income of Rs.150.28 billion for the corresponding period of the previous year.

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Cash Credit 36000 CRISIL D Cash Credit 36000 CRISIL BB+/Watch Negative
Letter of Credit 38000 CRISIL D Letter of Credit 38000 CRISIL A4+/Watch Negative
Proposed Cash Credit Limit 5500 CRISIL D Proposed Cash Credit Limit 5500 CRISIL BB+/Watch Negative
Proposed Letter of Credit 33492.4 CRISIL D Proposed Letter of Credit 33492.4 CRISIL A4+/Watch Negative
Proposed Long Term Bank Loan Facility 43400 CRISIL D Proposed Long Term Bank Loan Facility 43400 CRISIL BB+/Watch Negative
Proposed Short Term Bank Loan Facility 25000 CRISIL D Proposed Short Term Bank Loan Facility 25000 CRISIL A4+/Watch Negative
Term Loan 144987.6 CRISIL D Term Loan 144987.6 CRISIL BB+/Watch Negative
Total 326380 -- Total 326380 --
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March 09, 2016