September 27, 2012

Mumbai

Krishana Phoschem Limited

Rating Suspended

(Refer to Annexure 1 for details on facilities)

CRISIL has suspended its ratings on the bank facilities of Krishana Phoschem Ltd (KPL). (MIOT). The suspension of ratings is on account of non-cooperation by KPL with CRISIL's efforts to undertake a review of the ratings outstanding. Despite repeated requests by CRISIL, KPL is yet to provide adequate information to enable CRISIL to assess KPL’s ability to service its debt. The suspension reflects CRISIL's inability to maintain a valid rating in the absence of adequate information. CRISIL considers information availability risk as a key credit factor in its rating process and non-sharing of information as a first signal of possible credit distress, as outlined in its criteria ‘Information Availability Risk in Credit Ratings’.

About the Group

CRISIL has combined the business and financial risk profiles of KPL and Madhya Bharat Agro Product Ltd (MBAPL), together referred to as the Ostwal group. This is because 50 per cent of KPL’s revenues are derived from sales to MBAPL, though inter-group sales are expected to decline in the future because of MBAPL’s backward integration into rock phosphate beneficiation. Moreover, the two companies are under a common management and have fungible cash flows.

The Ostwal group has been promoted by Mr. M K Ostwal. Currently, Mr. Ostwal and his two sons, Mr. Pankaj and Mr. Praveen, manage the group’s four companies, all operating in fertiliser and allied businesses. MBAPL was acquired in 2004 and manufactures SSP. The company has an installed capacity of 60,000 tonnes per annum (tpa) in Sagar (Madhya Pradesh), while its registered office is in Bhilwara (Rajasthan). Mr. Pankaj Ostwal looks after the management of MBAPL.

KPL was incorporated in 2004. Set up by Mr. Roop Lal Patel, Mr. Dilip Kumar Gadia, and Mrs. Geeta Paliwal, the company manufactures BRP, wherein low-grade rock phosphate ore is processed and enriched to produce high-grade rock phosphate. KPL commenced operations in 2005 and reported losses till 2007; during this period, the ownership of the company changed twice and it was acquired by the current promoters, the Ostwal family, in 2007. Mr. Praveen heads the management of KPL as its Managing Director. The company has an installed capacity of 200,000 tpa for BRP at its unit at Meghnagar (Madhya Pradesh).

Annexure 1 - Details of various bank facilities