ICRA has downgraded the long term rating of Ferro Alloys Corporation’s (FACOR) Rs 108.90 crore funds based limits from A- to BBB. The long term rating has been assigned a “negative” outlook. The credit rating agency has also downgraded the short term rating from A2+ to A2 for Rs 54.00 crore non-fund based limits of FACOR.
The ratings revision takes into account the significant impact on FACOR’s profitability in first half of the current financial year with the decline in Ferro Chrme realizations owing to slowdown in its demand; and an increase in production cost backed by decline in capacity utilization levels, increase in extraction cost of Chrome ore from the captive mines, increase in raw materials prices and steep rise in power tariffs.
These factors combined have lead to a decline in the company’s operating profit margins from 12.6% in FY11 to 0.14% in the 1H FY12. The ratings further take into consideration the rise in the company’s gearing levels with considerable debt employed for investments in its subsidiary FACOR Power (FPL); the situation is unlikely to reverse with various other planned capital expenditure programmes in the near future.
However, the ratings continue to be constrained by the intensely competitive and cyclical nature of the Ferro- alloys industry. The ratings, however derive support from FACOR’s experienced promoters; its integrated operations with access to captive chrome-ore mines and operational group captive power plant which has reduced company’s dependence on Orissa State Electricity Board for its power requirements since December 2011 onwards.
| Company Name | CMP |
|---|---|
| Indian Metal & Ferro | 1566.85 |
| Maithan Alloys | 1036.10 |
| Nava | 704.50 |
| Indsil Hydro Power | 41.30 |
| Shyam Century | 5.61 |
| View more.. | |
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