Financial Daily from THE HINDU group of publications
Thursday, Jun 06, 2002
Financial Daily from THE HINDU group of publications Thursday, Jun 06, 2002 |
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Money & Banking
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Short Term Instruments Nagaland decision boosts Greenply Ind prospects Our Bureau
KOLKATA, June 5 THE fact that Nagaland has allowed plywood units to continue operations in certain areas has come as a boon for Greenply Industries, which has sought to raise funds through a commercial paper issue. The permission by the Nagaland Government has influenced the CP rating assigned by ICRA. The Supreme Court ban on felling of trees in the North-East had hit the plywood processing units in the region, not many of which hope to turn around by diversifying into other areas. Greenply Industries has a Rs 10-crore CP programme, rated `A2' by ICRA. The assignation, according to the rating agency's definition, indicates high safety in the short term. It takes into account the company's brands and their presence in the plywood and laminates segments. There are risks associated with the location of Greenply's unit in the North East, the agency has pointed out. The Nagaland Government's stance has helped mitigate such factors to an extent. These risks have been placed on the same platform as the pressure on the company's operating margins and liquidity on account of high working capital needs. The two brands - Greenply and Greenlam - are said to be commanding 15 per cent and 30 per cent respectively of the organised markets in the plywoods and laminates sectors. The company's gross turnover went up over the 1998-2001 period, chiefly on account of a steady increase in average realisations of products as well as sale of processed timber. Operating margins, however, decreased because of increasing power and employee costs, and selling expenses, ICRA has noted. "Greenply's high capital expenditure incurred over 1999-2001, which was funded by long term borrowings from FIs, has led to high gearing, which, as on March 31, 2001, stood at 2.02 times,'' it is observed. The company's liquidity has come under pressure, as reflected by the high average bank utilisation levels in the past on account of high working capital requirements. This is expected to hold good in the future as well.
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