 "Nirma washing powder")
Nirma Ltd, a manufacturer of detergents, soaps, and chemicals, plans to raise up to Rs 3,500 crore through non-convertible debentures (NCDs) to finance business growth, including acquisitions.
The company has proposed to acquire Glenmark Life Sciences Ltd (GLSL) to diversify its business. The acquisition is likely to be funded largely through debt. The fundraise through debt would increase the financial leverage (net debt to Ebitda) up to 2.75 times in fiscal 2024.
Rating agency CRISIL has assigned an “AA” rating to Nirma’s proposed NCDs issue and reaffirmed ratings on the company’s existing bank facilities and debt instruments.
The acquisition is expected to be completed well within the earlier expected timeline, aka in the latter half of fiscal 2024, the rating agency said in a statement.
The rating action takes into account the healthy business profile and strong financial profile of Nirma. The leverage is expected to moderate from these levels over the next couple of years. The ratings will remain sensitive to management’s plan around de-leveraging.
Over the past three fiscal years, the company has deleveraged the balance sheet with net debt to Ebitda improving to 0.5 times as of March 31, 2023, from its peak of 2.8 times as of March 31, 2020. The company also has a track record of deleveraging within 2-3 years of any large debt-funded expansion or acquisition, CRISIL said.
The liquidity position of the company is strong. It is supported by moderately utilised working capital limits and healthy liquidity of around Rs 1,800 crore at the consolidated level as of March 31, 2023. The company is expected to generate annual cash accruals of Rs 1,300-1,500 crore at the consolidated level against debt repayment of Rs 650-750 crore in fiscal 2024.
