JCR-VIS Credit Rating Company Ltd (JCR-VIS) has reaffirmed the medium to long-term and short-term entity ratings of BBB ('Triple B) and A-3 (A Three) respectively of Gharibwal Cement limited (GCL).
In addition, JCR-VIS has converted the preliminary rating of A-(Single A Minus) assigned to the proposed TFCs of Rs 400m (with a further green shoe option of Rs 100m) to final rating after review of relevant signed legal documents. The outlook on the medium to tong term entity and TFC ratings is 'Stable'.
GCL has sustained significant losses in the last financial year due to the cement prices falling below the optimum level required to cover production costs from its existing inefficient wet-process based manufacturing plant.
Consequently, the plant remained shut down for a number of days during the year while capacity utilisation still remains low. However, JCR-VIS has taken into account the substantial sponsor support demonstrated by the shareholders of the company through injection of funds amounting to Its. 0.76b. This in addition to the proceeds of around Rs 0.29b (including capital gain of Rs 0.13b) from the sale of shares held by the company of Dandot Cement Company Limited, have helped maintain the balance sheet strength around projected levels as at June 30,2007 even after accounting for the losses and cost overruns in the ongoing expansion project.
The company expects to commence commercial production from the under construction dry process line in 2Q 2008. The TFC rating also takes into account the external enhancement built into the TFC structure.-PR