Ratings Long-term Bank Short-term Bank Long-term /Shortterm Bank Total Bannari Amman Sugars Limited January 13, 2017 Amount 871.50 (reduced from 1,239.50) 7.50 15.40 894.40 (Rupees Eight Hundred Ninety Four crore and Forty lakh only) Ratings 1 (Single A Plus; Outlook: Stable) (A One Plus) / (Single A Plus; Outlook: Stable/ A One Plus) Rating Action Details of instruments/facilities in Annexure-1 Detailed Rationale The ratings assigned to the bank facilities of Bannari Amman Sugars Limited (BASL) are removed from credit watch on completion of amalgamation of Madras Sugars Limited with BASL. The ratings continue to factor in the well-established and long track record of operations of BASL in the sugar industry, relatively better operating profit margin, integrated nature of its sugar business with income from power generation & distilleries and additional diversification in the revenue stream derived from granite business. The ratings also take into account improvement in the financial performance during FY16 (refers to the period April 01 to March 31) and H1FY17 (refers to the period April 01 to September 31) with turnaround in the sugar industry. The ratings continue to remain constrained by the inherent cyclicality of sugar business, high level of regulations in the industry and moderate leverage levels. In view of cyclicality associated with the industry and increase in debt levels post-merger of Madras Sugars Ltd, the ability of BASL to improve its capital structure further and improve profitability would be the key rating sensitivities. Detailed description of the key rating drivers The ratings of Bannari Amman Sugars Limited (BASL) were placed under credit watch in view of the proposed amalgamation of its group company, Madras Sugars Limited (MSL, rated CARE BBB (credit watch) ) with BASL. In view of completion of amalgamation of MSL with BASL and based on review of financials of merged entity the ratings have been removed from credit watch. BASL is the flagship company of the group and boasts of a successful operational track record of around 25 years in the sugar industry. The company has two units located in Karnataka (Mysore and Chamarajanagar district) and three units in Tamil Nadu (Erode, Thiruvannamalai and Villupuram district) including one unit transferred from MSL. 1 Complete definitions of the ratings assigned are available at www.careratings.com and other CARE publications 1 Analysis & Research Limited
BASL has integrated nature of operations. It is engaged in the manufacture of sugar, industrial/potable alcohol, bio-compost, granite products and generation of power through sugar cogen and windmills. As on September 2016, BASL has aggregate capacity of 23,700 TCD spread across five units (two in Karnataka & three in Tamil Nadu), two distilleries with a combined capacity of 127.5 KLPD and 129.8 MW of co-generation capacity with six power plants. The company has also installed 7 wind mills having combined capacity of 8.75 MW and a granite unit processing high quality granite products. During FY16, sugar business accounted for 75% of the total income and rest of the income generated from power (11%), granite (5%) and Distillery (9%). The operational performance of the company improved during FY16 and H1FY17. With increase in sugar prices since H2FY16 the performance of the company improved in FY16. The average sales realization of sugar has further improved during H1FY17. Apart from this, increased crushing in FY16 also resulted in higher income from the power division (growth of 75%) during the period. BASL has reported PAT of Rs.32 crore on total operating income of Rs.1,421 crore in FY16 as against PAT of Rs.1 crore on total operating income of Rs.938 crore in FY15. With increase in sugar prices, during H1FY17, the company registered PAT of Rs.67 crore (PY loss Rs.57 crore) on total operating income of Rs.993 crore (PY Rs.735 crore). The capital structure of BASL was strong in the past with overall gearing of 0.49 times as on March 31, 2013. Subsequently, due to debt availed for capex and working capital to support higher sugar stock resulted in increase in borrowings in the next two years. Overall gearing stood at 1.28 times as on March 2015. With Amalgamation of MSL with BASL the total debt of MSL was taken over by BASL which resulted in further moderation in leverage levels with overall gearing of 1.67 times as on March 31, 2016. With turnaround in industry and improvement in profitability during H1FY17, the overall gearing improved and stood at 1.13x as on September 30, 2016. Analytical approach: Standalone. Applicable Criteria Criteria on assigning Outlook to Ratings CARE s Policy on Default Recognition Criteria for Short Term Instruments Criteria for placing rating on credit watch Rating Methodology-Manufacturing Companies Financial ratios Non-Financial Sector About the Company BASL is the flagship company of the Coimbatore-based Bannari Amman group, one of the largest industrial conglomerates in South India and is engaged in the manufacture of sugar, industrial/potable alcohol, bio-compost, granite products and generation of power. BASL has four sugar units spread across Tamil Nadu and Karnataka with a total installed capacity of 20,100 tonnes crushed per day (TCD) at the end of September 30, 2016. BASL also has two distilleries with a combined capacity of 127.5 kilo litres per day (KLPD) and 104.8 Megawatt (MW) of cogeneration capacity with five power plants and a granite division. Also, on account of Amalgamation of Madras Sugar Ltd (MSL) with BASL with effective date from January 01, 2016, one additional sugar unit has been added for BASL with capacity of 3600 TCD and co-gen unit with capacity of 25 MW. BASL reported a PAT of Rs.32 crore on a total operating income of Rs.1,421 crore in FY16 and PAT of Rs.67 crore on a total operating income of Rs.993 crore in H1FY17. Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 2 Analysis & Research Limited
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. Analyst Contact Name: Mr P. Sudhakar Tel: 044-28490811 Email: p.sudhakar@careratings.com **For detailed Rationale Report and subscription information, please contact us at www.careratings.com About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. Annexure-1 Details of Name of the Instrument Fund-based - ST- EPC/PSC Non-fund-based - LT/ ST-Letter of credit Fund-based - LT-Cash Fund-based - LT-Term Loan Non-fund-based - LT/ ST-Bank Guarantees Date of Issuance Annexure-2 Rating History (Last three years) Sr. No. Name of the Instrument/Bank 1. Fund Based - ST- EPC/PSC Type Coupon Rate Maturity Date Size of the Issue - - - 7.50 - - - 5.00 - - - 500.00 - - March 2022 371.50 - - - 10.40 Current Ratings Amount Outstanding Rating ST 7.50 CARE Date(s) & Rating(s) assigned in 2016-2017 1) Rating assigned along with Rating Outlook / / Chronology of Rating history Date(s) & Date(s) & Rating(s) Rating(s) assigned in assigned in 2015-2016 2014-2015 1) 1) Date(s) & Rating(s) assigned in 2013-2014 1) 3 Analysis & Research Limited
2. Non-Fund Based - LT/ ST-Letter of credit 3. Fund Based - LT-Cash 4. Fund Based - LT-Term Loan 5. Non-Fund Based - LT/ ST-Bank Guarantees LT/ST 5.00 CARE A+; Stable / CARE LT 500.00 CARE A+; 1)CARE A+ Stable LT 371.50 CARE A+; 1)CARE A+ Stable LT/ST 10.40 CARE A+; Stable / CARE 1)CARE A+ 1)CARE A+ / / / / 4 Analysis & Research Limited
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