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JCR-VIS assigns initial ratings to the Chashma Sugar Mills Ltd

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November 16, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B-Plus/A-Two) to Chashma Sugar Mills Limited (CSML). Outlook on the assigned ratings is ‘Stable’.

According to the rating agency, the medium to long-term rating of ‘BBB+’ denotes adequate credit quality with reasonable protection factors. Moreover, the risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamental and liquidity factors.
The ratings assigned to CSML take into account its association with The Premier Group having business interests in sugar, high grade polypropylene, tableware and distribution of consumer goods and pharmaceuticals.

As per the JCR-VIS, the ratings draw comfort from sizeable scale of operations and revenue diversification through forward integration in ethanol business providing an adequate cushion in withstanding the impact of cyclicality of sugar sector.

However, the ratings remained constrained on account of heightened financial risk owing to increased leverage indicators and weakening of debt coverages.

Revenue contribution from ethanol unit has exhibited improvement on a timeline basis.

Higher margins, streamlining of finance cost, increase in other income and lower incidence of taxation led to improvement in profitability during 9M18, says the report.

The equity base of the company has steadily strengthened on the back of profit retention.

The ratings are dependent on projected improvement in gearing and debt coverage, going forward.

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Posted on: 2018-11-16T10:48:00+05:00

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