Press Release - Brickwork Ratings

Rating Rationale
Brickwork Ratings reaffirms ‘BWR A+ (SO)’ for IDL Speciality Chemicals Ltd.’s
Structured Secured NCD of ` 150 Cr with a present Outstanding of ` 75 Cr
Brickwork Ratings (BWR) has reaffirmed the following Rating1 for IDL Speciality
Chemicals Ltd. (IDL) structured secured NCD of ` 150 Cr having tenor up to 18 months.
‘BWR A+ (SO)’ stands for an instrument that is considered to have adequate degree of safety
regarding timely servicing of financial obligations. Such instruments carry low credit risk.
Of the ` 150 Cr NCD issue rated, the Company has redeemed NCDs aggregating to ` 75 Cr
and the current outstanding portion is ` 75 Cr.
Outstanding Ratings
Instruments
Secured NCD
Amount
Assigned/
Reaffirmed
Rating
(₹ Cr)
100
Issue
Date
Rating
History
Rating As on
BWR A+ (SO)
BWR A Plus
Structured
Obligation
Withdrawn July, 2012 Withdrawn
Outlook Stable
BWR A+ (SO)
BWR A Plus
150
Structured
(Consists of series I & II
BWR A+ (SO)
Secured NCD
Obligation
Reaffirmed Dec, 2012
of ₹ 75 Cr each, of
(Stable)
which series II has
already been paid)
Outlook Stable
BWR has essentially relied upon term sheet, information and clarification related to the
transaction, as provided by the Issuer. The rating factors, inter alia, the strength of the
underlying security coverage, structure of NCD issue and the profile of the Promoters.
However, the rating is constrained by weak financial profile and insufficient cash flows of the
Issuer.
IDL Speciality Chemicals is a 100% subsidiary of HVL, which is the Media &
Communications business of Hinduja Group. HVL provides cable television and broadband
internet, local television programming, and movie channel and movie based programming
services.
IDL was incorporated in 1971 as IDL Agro Chemicals Ltd for manufacturing APIs and
intermediates for cardiac, anti-depressants, anti-histamines, analgesic and anti-amoebic
1
Please refer to www.brickworkratings.com for definition of the Ratings
www.brickworkratings.com
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10 Mar 2014
drugs. It was merged with Gulf Oil India in 2002 to form Gulf Oil Corporation. In Sep 2009,
Gulf Oil Corporation sold IDL’s bulk pharmaceutical business to Biocon Ltd. On 29th March,
2010, IDL was demerged from Gulf Oil Corporation and all its shares were acquired by HVL.
Now the Company is having a small operation of dairy business and is also trading in equity
market. The Company also owns 4.75 acres of land in Hyderabad which it plans to monetize
it in near future.
The Company has raised ` 150 Cr by way of secured redeemable NCD with a tenor of 18
months. Of which, NCD of Series I of ` 75 Cr to be repaid after 18 months from deemed date
of allotment and Series II of ` 75 Cr has already been paid as investor has exercised the put
option at the end of 12 months from deemed date of allotment. The NCD is secured through
a first ranking exclusive charge over the Company pledged shares and parent pledged shares
in favour of the Debenture Trustee such that there is a share cover of 1.75 times the face
value of NCD. HVL has also given the shortfall undertaking in favour of Debenture Trustee.
After HVL acquired IDL in Mar’10, it disposed of its earlier business of manufacturing APIs
for Pharma industry. Trading in shares is now the dominant activity of IDL. It’s revenues
decreased to ` 1.52 Cr in FY13 from ` 13.58 Cr in FY12 mainly due to unrealized profit from
sale of securities. IDL continue to report losses in FY13 as it did in FY12. It has a negative
net-worth due to negative reserves resulting from continued losses.
As of FY13, IDL has a negative Net-worth and has been reporting losses for last four years. As
such, the current as well as expected cash flows of IDL are not sufficient to meet the
obligations of the balance NCD. IDL is engaged in the business of trading in Equity Shares
which is arguably considered as a risky business.
The macroeconomic outlook for India continues to remain challenging with high inflation,
high fiscal deficit and slowing of capital investment plans. Given that the current cash flows
from IDL is not sufficient to pay the obligations under the NCD, the support from Parent
Company HVL (as manifested in the form of Shortfall Undertaking) and liquidity of share of
Indusind Bank Ltd. remain the key Rating sensitivities.
Analyst Contact
Relationship Contact
[email protected]
[email protected]
Phone
Media Contact
1-860-425-2742
[email protected]
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision
or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied
warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned
by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable
for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at
any time for any reasons.
www.brickworkratings.com
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10 Mar 2014

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