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CREDIT ANALYSIS & RESEARCH LIMITED 1
ATUL LTD.
Long-term bank loans/facilities 'CARE A-'
Short-term bank loans/facilities 'PR1'
Rating
CARE has retained the 'CARE A-' [Single A minus] rating
assigned to the long-term bank loans/facilities of Atul Ltd.
(Atul). This rating is applicable to facilities having tenure
of more than one year. Facilities with this rating are
considered to offer adequate safety for timely servicing
of debt obligations. Such facilities carry low credit risk.
Further, CARE also retained 'PR 1' [PR One] rating
assigned to the short-term bank loans/facilities of Atul.
This rating is applicable to facilities having tenure of up
to one year. Facilities with this rating would have strong
capacity for timely payment of short-term debt obligations
and carry lowest credit risk. Within this category, facilities
with relatively better credit characteristics are assigned
PR1+ rating.
CARE assigns '+' or '-' signs to be shown after the
assigned rating (wherever necessary) to indicate the
relative position within the band covered by the rating
symbol.
Facilities rated by CARE aggregate to Rs.485.49 crore,
including outstanding/sanctioned term loans of Rs.155.49
crore, fund based working capital limit of Rs.200 crore
and sanctioned non-fund based limit of Rs.130 crore.
The ratings continue to factor in wide experience of
promoters and competent management, established track
record and strong position of the company in the chemical
industry with diversified product portfolio, strong R&D
setup, established customer base and improving financial
profile characterized by moderate gearing levels,
improving profitability and comfortable liquidity position.
The ratings, however, continue to remain constrained due
to weak end-use industry scenario marked by stiff
competition from unorganized sector, high operational
overheads, exposure to raw material price fluctuations
with global linkages and foreign exchange fluctuation.
Company's ability to improve its profitability through better
raw material price-risk management, control over
operational overheads and improvement in gearing levels
are the key rating sensitivities.
Company Background
Atul was originally promoted by Late Shri Kasturbhai
Lalbhai in 1947 as Atul Products Ltd. as a step towards
backward integration of their cotton textile business. In
1996, it was renamed as Atul Ltd. It has one of the biggestintegrated chemical complexes in Asia, manufacturing a
wide variety of dyes & dye intermediates, bulk chemicals
& intermediates, agrochemicals, polymer & pharma
intermediates and aromatics. The over three hundred
products manufactured by the company, find wide usage
in industries like - textile, paints, agriculture, fragrance &
flavours, tyre, paper, pharmaceutical, aerospace,
construction, etc.
Operations
Atul's operations are divided into six Strategic Business
Units (SBUs) viz.: Colours/Dyes (contributing to 22% of
FY09 net sales), Aromatics (26%), Bulk chemicals and
Intermediates (7%), Crop Protection (21%),
Pharmaceuticals & Intermediates (6%) and Polymers
(16%). While Aromatics division is located in Ankleshwar
(Gujarat), all the other divisions are located in Valsad,
Gujarat. Atul sells its products both in the domestic as
well as international markets with exports contributing
nearly 50% of the sales during FY09.
Some of the major contributing products include p-cresol, p-anisic aldehyde, p-anisic alcohol, p-cresidine,
epoxy resins, sul fones having wide range of
applications in different industries including personal
care, pharmaceuticals, dyestuff, paper, tyre, textile,
agriculture, aerospace etc. Atul enjoys fair amount of
market share in many of these products segments
around the world.
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CAREVIEW2
Major raw materials for its products are mainly toluene,
phenol and methanol. Atul also manufactures some of
the intermediate products at its some divisions which are
raw material for its other divisions. The raw materials are
largely procured from domestic market and only 26%during FY09 was procured from abroad. Raw materials
are largely crude oil derivatives which expose the
company to raw material price risk.
Financial Performance
Atul's total income has grown at CAGR of 12% over the
past three years till FY09 primarily driven by growth from
crop protection, aromatics and pharmaceutical divisions.
Atul's total operating income grew by 17% during FY09
on standalone basis, primarily driven by growth from
across almost all the divisions.
PBILDT margin improved significantly during FY09 due
to improvement in sales realization coupled with decline
in raw material prices and spreading of overhead costs
over larger production base.
With improvement in PBILDT margin, PAT margin also
improved during FY09 despite increase in interest and
depreciation costs and other extraordinary losses
pertaining to exchange rate fluctuations.
Long-term debt equity ratio, though increased marginally,
remained comfortable at 0.65 times as at Mar.31, 2009.
However, the overall gearing ratio improved and stood
at 1.02 times as at Mar.31, 2009 compared to 1.31 times
as at Mar.31, 2008, due to accretion of profits to networth
and repayment of term loans. With the improvement in
profitability margins, interest coverage ratio improved to
2.95 times during FY09.
Current ratio improved to 1.60 times as at Mar.31, 2009
from 1.37 times as at Mar.31, 2008 mainly due to
reduction in bank borrowings for working capital anddecline in the level of sundry creditors for expenses.
Atul's overall operating cycle improved during FY09 to
52 days compared to 64 days during FY08 due to
decrease in collection period.
Results for H1FY10: During H1FY10, Atul reported a PAT
of Rs.33 crore on a total income of Rs.544 crore as
against the PAT of Rs.18 crore registered on total income
of Rs.650 crore during H1FY09. PBILDT margin of
13.27% during H1FY10 was higher than its FY09 levels.
Industry Scenario
Dyestuff:
The global dyestuff industry (dyes and pigments) has
witnessed a gradual shift of manufacturing facilities from
the developed countries to Asia, particularly China and
India due to environmental considerations, availability of
trained and inexpensive manpower and the relocation of
the end-user industries mainly textile and leather to the
Asia-Pacific region.
The Indian dyestuff industry is widely fragmented between
the organised and unorganised sectors. There are
approximately 950 dye manufacturing units in India of
which 50 units are in the organised and 900 in the
unorganised sector. The two western States of
Maharashtra and Gujarat account for over 90% of the
total dyestuff production in the country.
India has emerged as a global supplier of dyestuffs and
dye intermediates, particularly for reactive, acid, vat and
direct dyes. The Indian dyestuff industry meets more than
95% requirement of the domestic market and has
gradually also made a dent in the global market. The
worldwide demand for organic colourants is estimated at
USD 10.6 billion in 2008. India accounts for 6.80% of the
world dyestuff production. It faces stiff competition in the
international market from China and some south-east
Asian countries.
At present, vat, disperse and reactive dyes and pigments
are manufactured mainly by the organised sector as these
are very capital intensive. Disperse dyes have maximum
share in the total domestic demand followed by acid and
direct dyes.
Others Products:
Resorcinol, a chemical intermediate, is the essential
component of an adhesive system used in the tyre
manufacturing process and other fibre-reinforced rubber
mechanical goods. INDSPEC Chemical Corporation is
the world's largest producer of resorcinol, having global
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CREDIT ANALYSIS & RESEARCH LIMITED 3
Financial results
(Rs.crore)
For the period ended / as at Mar.31, 2007 2008 2009(12m, A) (12m, A) (12m, A)
Working ResultsNet Sales 920 1028 1202
Total operating income 924 1037 1224
PBILDT 68 60 154
Depreciation 31 30 32
Interest 29 31 41
PBT 20 31 50
PAT [after deferred tax] 19 29 40
Gross cash accruals 49 56 74
Financial Position
Equity capital 30 30 30
Networth 292 312 344
Total capital employed 678 758 731
Key Ratios
Growth
Growth in total income (%) 5.51 12.33 17.98
Growth in PAT [after deferred tax] (%) -79.47 47.71 39.97
Profitability (%)
PBILDT / Total operating income (%) 7.38 5.79 12.59
PAT / Total income (%) 2.10 2.76 3.27
ROCE (%) 5.68 4.69 16.41
Average cost of borrowing (%) 8.11 7.73 10.36
Solvency
Long-term debt equity ratio (x) 0.64 0.66 0.65
Overall gearing ratio (x) 1.21 1.31 1.02
Interest coverage (x) 1.28 1.09 2.95
Term debt / GCA (years) 4.96 4.92 4.26
Liquidity
Current ratio (x) 1.41 1.37 1.60
Quick ratio (x) 0.92 0.87 1.00
Turnover
Capital turnover ratio (x) 1.40 1.45 1.64
Working capital turnover ratio (x) 2.81 2.87 3.35
Avg. collection period (days) 85 81 66
Avg. inventory period (days) 95 86 81
Avg. creditors period (days) 106 103 95
Total operating cycle (days) 74 64 52
A: AuditedNote:Shri S.M. Datta, the Director of Atul Ltd, is one of CARE's Rating
Committee members. He did not participate in the rating processnor the Rating Committee while assigning the rating for bankfacilities of the company.
market share of above 50%. In India, Atul has
approximately 40% share of the domestic resorcinol
market, whereas the balance requirement is met mainly
through imports. With Atul's plan to increase the resorcinol
manufacturing capacity, the company will be able to meetthe domestic consumer's requirements.
Agrochemical industry plays a vital role in ensuring food
security and economic benefits to the farmers. Domestic
consumption of agrochemicals grew at a CAGR of 8.67%
during the five year period ending FY07. Domestic
consumption in FY 07 stood at Rs.4,463 crore, an
increase of 7.72% compared to previous year. The growth
for two consecutive years viz. FY06\FY07 was due to
good monsoons, good support prices of crops, pro
agricultural policies by the GoI and higher agricultural
produce. Insecticides constitute the largest proportion of
agrochemicals consumption in India. Exports grew at a
CAGR of 15.84% in last five years ending FY08 valued
at Rs.3,143 crore. The increased export focus is due to
better export realizations, global outsourcing due to low
cost production, low or nil credit periods in export markets
and tax sops.
Atul is the leading manufacturer of p-cresol (aromatic
division) in India, having almost 30% domestic market
share. The balance demand is being met mainly through
imports. Atul has almost 80% domestic market share of
p-anisic aldehyde which is used mainly as an intermediate
in the synthesis of other compounds important in
pharmaceuticals and perfumery.
Prospects
Overall growth of Atul would be driven by the initiatives
taken by it for technological up-gradation, innovation of
new products and mitigating risk related to fluctuation in
input costs by moving towards more value added
products. The prospects would also be driven by the
overall improvement in the performance of its colors
division and agrochemicals division and other divisions'
performance being stable.
Disclaimer
CARE's ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bankfacilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to beaccurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is notresponsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bankfacilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.
December 2009
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CREDIT ANALYSIS & RESEARCH LIMITED 1
CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:
HEAD OFFICE: MUMBAI
Mr. D.R. Dogra Mr. Rajesh Mokashi
Managing Director Dy. Managing Director
Cell : +91-98204 16002 Cell : +91-98204 16001
E-mail : [email protected] E-mail: [email protected]
Mr. P N Sathees Kumar Mr. Ankur Sachdeva
Exective Vice President - Marketing Vice President - Marketing (SME)
Mobile: +91-9820416004 Cell : +91-9819698985
E-mail : [email protected] E-mail: [email protected]
Mr. Vivek Palan
Manager - Banking & Finance
Cell : +91-98206 06406
E-mail: [email protected]
4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway,
Sion (East), Mumbai 400 022 Tel.: (022) 67543456 Fax: (022) 67543457
Website: www.careratings.com
OFFICES
Mr. Mehul Pandya
Regional Manager
32 TITANIUM,
Prahaladnagar Corporate Road,
Satellite,
Ahmedabad - 380 015.
Tel - 079 4026 5656Mobile - 98242 56265
E-mail: [email protected]
Mr. Pradeep Kumar
Regional Manager
Unit No. O-509/C, Spencer Plaza,
5th Floor, No. 769, Anna Salai,
Chennai - 600 002.
Tel: 044 2849 7812/2849 0811
Mobile - 98407 54521
E-mail: [email protected]
Mr. Sukanta NagRegional Manager
3rd Floor, Prasad Chambers
(Shagun Mall Building),
10A, Shakespeare Sarani,
Kolkata - 700 071.
Tel - 033 2283 1800/1803
Mobile - 98311 70075
E- mail: [email protected]
Mr. Sundara Vathanan
Regional Manager
Unit No. 8, I floor, Commander's
Place No. 6, Raja Ram Mohan Roy Road,
Richmond Circle,
Bangalore - 560 025.
Tel - 080 2211 7140Mobile - 98803 60878
E-mail: [email protected]
Mr. Ashwini Jani
Regional Manager
401, Ashoka Scintilla,
3-6-520, Himayat Nagar,
Hyderabad - 500 029.
Tel - 040 40102030
Mobile - 91766 47599
E-mail: [email protected]
Ms. Swati AgrawalRegional Manager
710 Surya Kiran,
19 K.G. Road,
New Delhi - 110 001.
Tel - 011 2331 8701/2371 6199
Mobile - 98117 45677
E-mail: [email protected]
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