BASF India Rs 1,000-crore greenfield project at Dahej in Gujarat is to be entirely funded by debt from its group company, BASF Co-ordination Centre NV.
The debt will come in the form of ‘external commercial borrowings’, according to rating agency Crisil.
The agency said in a recent press release that BASF India would be able to meet the ECB repayment obligation which will be due in five years from draw-down.
“Crisil also believes that the parent will allow BASF India to extend the repayment tenure of ECBs in case of exigency,” the statement said.
Dahej unit
At Dahej, BASF India is putting up a chemical plant to produce polyurethane, care chemicals and polymer dispersion chemicals for coatings and paper. The plant is due to go on stream in 2014.
BASF India’s products cater to a variety of end-user industries, including leather, textile, paper, construction, automotive, personal and home care, agriculture, petrochemicals, and refining.
The diversity of revenue streams helps the company mitigate the impact of cyclicality and competitive pressures in some business segments.
Networth, liquidity
BASF India has a “healthy financial risk profile”, marked by its sizeable networth of Rs 1,030 crore as on March 31, 2012; healthy liquidity with unutilised bank limits of Rs 350 crore as on June 31, 2012; and estimated cash accruals of more than Rs 170 crore.
The company’s liquidity is expected to remain unaffected by the additional debt as the same is raised from the parent, and the company enjoys adequate flexibility in repayment terms.
However, any significant time or cost overrun in the capex or additional project funding from external sources will remain rating sensitivity factors.
Agrochemical, plastic biz
However, BASF India also remains exposed to risks inherent in the agrochemical business, including erratic rainfall, and intense competition, especially from spurious pesticides and insecticides.
Besides, the company’s plastics business continues to witness pricing pressures and is reporting weak profitability because of competition and surplus capacity, thereby impacting the company’s return on capital employed ratio.
Net profit, operating income
For 2011-12, BASF India reported a net profit of Rs 100 crore on an operating income of Rs 3,516 crore, against a net profit of Rs 118 crore on an operating income of Rs 3,064 crpre for 2010-11.
For the three months ended June 30, 2012, BASF India reported a net profit of Rs 71.68 crore compared with Rs 52.66 crore in the same period of last year.
On the BSE today, the BASF shares were trading at Rs 651, down 0.79 per cent from the previous close.