Crisil reaffirms rating of Jindal Saw's FD programme

Mumbai, May 22 (UNI) India's leading ratings agency Crisil has reaffirmed its ratings of Jindal Saw's fixed deposits programme following the Company's announcement of a foreign currency convertible bond (FCCB) issue aggregating USD 80 million denominated in Japanese Yen, with an option to increase by a further USD 20 million.

A press release issued here today stated that the rating continues to reflect Jindal Saw's leadership in the submerged arc-welded (saw) pipes industry where it accounts for 35 per cent of the total domestic capacity in the industry.

With the stabilisation of its cast iron and ductile iron (CI-DI) project and the resumption of production at its seamless pipes facility, the Company has a presence in all segments of the steel pipes industry. Jindal Saw's business is diversified across products, end-users, and markets (with a substantial export presence), lending stability to its revenues.

The release, however, pointed out that among factors that temper the rating at the current level are Jindal Saw's large working capital needs, vulnerability to fluctuations in raw material prices, and exposure to financially weak group companies.

On the Company's FCCB programme, the release pointed out that the proceeds from the issue will partly finance the Company's capital expenditure plan for the next three years, aggregating Rs 7 billion.

''Crisil believes that the impact of the FCCB debt is likely to be offset to a large extent by the Company's strong operational performance, driven by buoyancy in end-user industries and a robust order book position of USD 900 million,'' stated the release, pointing out that even though the Company's gearing is expected to be high at 1.7 times as on September 30, 2006, its debt protection measures are adequate and backed by strong cash accruals.

On Jindal Saw's future outlook, the release stated that the Company was likely to maintain its strong business position in the pipes industry, given the healthy growth in end-user industries.

''The adverse impact of the large FCCB debt is likely to be mitigated by the Company's strong operational performance over the medium term,'' the release stated, adding that ''however, any incremental debt-funded capital expenditure will have an adverse impact on the Company's credit risk profile''.

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