June 17, 2014
Mumbai
Balkrishna Industries Limited
 
Rated amount enhanced
 
Total Bank Loan Facilities Rated Rs.13150 Million (Enhanced from Rs.12900 Million)
Long Term Rating CRISIL AA-/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
(Refer to Annexure 1 for Facility-wise details)

CRISIL's ratings on the bank facilities of Balkrishna Industries Ltd (BIL) continue to reflect BIL's sound operating efficiency, improving product portfolio, increasing market share in the global off-highway tyre (OHT) market, and adequate financial risk profile, marked by healthy cash flows and adequate debt protection metrics. These rating strengths are partially offset by the vulnerability of BIL's operating margin to volatility in raw material prices, mainly rubber, and exposure to delays in timely ramp-up of capacity in its Bhuj (Gujarat) project.
 
For arriving at the ratings, CRISIL has combined the business and financial risk profiles of BIL and its subsidiaries, together referred to as BIL.

Outlook: Stable

CRISIL believes that BIL will continue to benefit over the medium term from expanding markets, improved product mix, and increasing capacities along with its established brand and sound operating efficiency. The outlook may be revised to 'Positive' if BIL achieves strong growth in turnover and increases its global market share in the OHT segment on a sustained basis, while maintaining a healthy operating margin. Conversely, the outlook may be revised to 'Negative' in case of slower-than-expected ramp-up of capacity in its Bhuj project or significant increase in its working capital borrowings, or if the company adopts a more aggressive policy to fund its capital expenditure programmes, thereby adversely impacting its gearing and debt protection metrics.

About the Company

BIL, based in Mumbai (Maharashtra), mainly manufactures OHTs. These tyres are used in vehicles meant for agricultural, industrial, construction, and earth-moving purposes. BIL's plants are located in Aurangabad (Maharashtra), with achievable capacity of 40,000 tonnes per annum (tpa); Bhiwadi and Chopanki (both in Rajasthan), each with achievable capacity of 60,000 tpa. Additionally, of the total capacity expansion project of 140,000 tpa that is being implemented at Bhuj in a phased manner, 40,000 tpa are operational as on March 31, 2014.
 
In 2013-14 (refers to financial year, April 1 to March 31), BIL derived about 96 per cent of its revenue from OHTs; of this, about 90 per cent was from exports, with Europe and North America accounting for about 53 per cent and 14 per cent, respectively. BIL's wholly owned subsidiary, Balkrishna Paper Mills Ltd (BPML), manufactures industrial paper, while its other wholly owned subsidiary, Balkrishna Synthetics Ltd (BSL), undertakes job work in textile processing for the group company, Siyaram Silks Ltd; together these subsidiaries accounted for about 4 per cent of BIL's consolidated revenues in 2013-14.
 
For 2013-14, BIL, on a consolidated basis, reported a profit after tax (PAT) of Rs.4.75 billion on net sales of Rs.37.27 billion, against a PAT of Rs.3.50 billion on net sales of Rs.33.74 billion for 2012-13.

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Cash Credit 100 CRISIL AA-/Stable Cash Credit 50 CRISIL AA-/Stable
Letter of credit & Bank Guarantee^ 6950 CRISIL A1+ Letter of credit & Bank Guarantee 6700 CRISIL A1+
Packing Credit 6100 CRISIL A1+ Packing Credit 6150 CRISIL A1+
Total 13150 -- Total 12900 --
^ Includes Rs.3750 million interchangeable as packing credit
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June 17, 2014

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