India Ratings & Research (Ind-Ra) has downgraded Neo Metaliks Limited's (NML) Long-Term Issuer rating to 'IND BB' from 'IND BB+'.
The Outlook is Stable.
NML's bank loan ratings have also been downgraded as follows:
Long-Term Loans INR300.5m (reduced from INR436.6m): Downgraded to ´IND BB´ from ´IND BB+´
Fund-based limits INR412m: Downgraded to ´IND BB´ from ´IND BB+´
Non-fund-based limits INR700.9m: Affirmed at 'IND A4+'
Key Rating Drivers
The downgrade reflects NML's EBITDA losses amounting to INR82m during FY12 (year end March), and around nine months of delay in the commercialisation of its sinter plant.
The ratings continue to factor in the company's low capacity utilisation of its pig iron capacities, as well as its single product profile comprising pig iron only.
Ind-Ra said it expects that NML's sinter project, which started commercial production in FY13, will result in direct cost savings for the company.
Positive: Net leverage below 4.5x on a sustained basis may result in positive rating action.
Negative: Net leverage above 6x on a sustained basis may result in negative rating action.
NML has been manufacturing pig iron since 2007 and has a manufacturing capacity of 146,200 MTPA.
It also has a power generation capacity of 4.5 MW which works on heat recovery mechanism, and has recently started (July 2012) a sinter plant of around 300,000 MT (around) in Durgapur, West Bengal, which was built at an approximate cost outlay of INR 800m.