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Corporate - Credit Rating
Madras Cements rejects Crisil's rating downgrade

N. Ramakrishnan

Gets its short-term debt rated by another agency

Chennai , Aug. 9

Madras Cements has rejected the downgrade in ratings for its various debt instruments by Crisil, a rating agency, and has got its short-term debt rated by another agency after asking Crisil to withdraw the ratings.

Crisil, in a recent rating release, said it was downgrading Madras Cements' various debt instruments due to a change in its expectations "regarding the future correction in the company's capital structure." Crisil said the company's large debt-funded capital expenditure plans of Rs 1,052 crore were a key rating sensitivity factor, especially since there was no infusion of additional equity.

`No info sought'

Asked about this, Mr A.V. Dharmakrishnan, Executive Director - Finance, Madras Cements, said the company had written to Crisil objecting to the entire rating exercise when no information had been sought from the company before the rating was completed. Only when the company objected, did Crisil seek some information, which was also given.

He said Madras Cements had undertaken all its previous capacity expansions only through internal accruals and debt, without going in for any equity infusion.

The company's net interest bearing debt would only account for 28 per cent of the total funds required to meet the capital expenditure in 2006-07 and 2009-08. The company had been prompt in servicing its debt and had pre-paid loans in several instances. The peak interest bearing debt for the expansion over the next two years would not be more than Rs 600 crore, when the company's capacity would be 10 million tonnes a year. The company would have no problem in servicing this debt, he said.

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