Credit rating agency Icra has revised the rating of Rs 20 crore non-convertible debenture (NCD) issue of Eveready Industries India Ltd (EIIL) to LBBB (L triple B), indicating moderate safety and considerable variability in risk factors from LAA (L double A), indicating high safety.
The press release issued by Icra says, "The protective factors are below average. Adverse changes in business and economic circumstances are likely to affect the timely payment of principal and interest as per terms."
The rating watch in the earlier rating has now been removed. The rating had been placed on watch pending completion of EIIL"s business and financial restructuring exercise and also on account of its proposed merger with Bishnauth Tea Company Ltd (BTCL).
The rating factors in the deterioration in EIIL's financial risk profile and its inability to bring in sufficient funds either through the sale of businesses/ assets which would have enabled the reduction in debt burden.
The business risk profile of EIIL has been affected due to continuing adverse tea prices and the emergence of local packeteers, which have posed a threat to established packet tea players like EIIL. Again, in the battery business, there has been a pressure on volumes, particularly in the D range of batteries which are sold largely in the rural areas.
However, EIIL has managed to increase its market share in both the D and AA categories of batteries in 2000-01. The company reported an operating income of Rs 882.5 crore and a profit after tax of Rs 11.86 crore in 2000-01.
EIIL's coverage indicators have been strained as a result of the high cost Rs 850.9 crore debt burden on its books. However, the company is in the process of restructuring its debt from financial institutions and banks which involves both a reduction in interest rates and an increase in the tenure of loans.
