ATUL LIMITED

Ratings Instrument/Bank Facilities Commercial Paper* Total Instruments Long-term Bank Facilities Short-term Bank Facilities Total Bank Facilities Amount (Rs. crore) 25.00 25.00 251.27 (Enhanced from Rs.220.57 cr) 138.00 (Enhanced from Rs.100 cr) 389.27 CARE A+ [Single A Plus] CARE A1+ [A One Plus] Revised from CARE A (Single A) Reaffirmed Ratings1 CARE A1+ (A One Plus) Remarks Assigned

*carved out of sanctioned working capital limits Rationale The revision in long-term rating factors in the gradual shift in the business mix of Atul that has led to a sustained improvement in its profitability and in turn capital structure and liquidity position during FY11 and Q1FY12. The ratings continue to factor in the wide experience of the promoters and competent management, established track record and strong position of the company in the chemical industry with diversified product portfolio, its leadership position in some of the high-value products, strong R&D setup and established customer base. The long-term rating is however constrained by its exposure to raw material price fluctuations (which are linked to international crude oil prices) and exchange rate fluctuations, implementation and stabilization risks associated with the ongoing debt-funded projects and increasing competition from unorganized players. The companys ability to further improve its profitability through better raw material price-risk management, control over operational overheads, timely execution of ongoing projects, their stabilization and control over gearing levels are the key rating sensitivities. Background Atul Ltd. (Atul) was originally promoted by late Shri Kasturbhai Lalbhai in 1947 as Atul Products Ltd. as a step towards backward integration of their cotton textile business. In 1996, it was renamed as Atul Ltd. It has one of the biggest integrated chemical complexes in Asia with a well diversified product portfolio catering to the requirement of varied industries like textile, paints, agriculture, fragrance & flavours, tyre, paper, pharmaceutical, aerospace and construction. Credit Risk Assessment Wide experience of promoters and competent management Atul was promoted by Shri Kasturbhai Lalbhai as a step towards backward integration of their cotton textile business in 1947. The Board of Directors of Atul comprises eminent personalities having very rich experience in the field of chemical, petrochemicals, finance, taxes, law etc. The company is headed by third generation entrepreneur Shri Sunil Lalbhai, Chairman and Managing Director, who is a technocrat and is well supported by well qualified and experienced senior management. Strong presence in chemical industry with diversified product portfolio Atuls operations were earlier divided into six Strategic Business Units (SBUs). During FY11, the company reclassified its product groups into two segments namely Life Science Chemicals and Performance and other Chemicals. Products used in Agriculture and Pharmaceutical industries are now part of Life Science Chemicals whereas Performance & other Chemicals division includes all the other products like dyes, pigments, epoxy resins, hardeners, rubber adhesives, polyurethane adhesives, cresols bulk intermediates, sulphones etc. Atul sells its products both in the domestic as well as international markets with exports contributing nearly 42% of the sales during FY11. Some of the major contributing products include p-cresol, p-anisic aldehyde, p-anisic alcohol, p-cresidine, epoxy

Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications

ISIEmergingMarketsPDF in-isb from 202.174.120.2 on 2013-01-30 08:43:30 EST. DownloadPDF. Downloaded by in-isb from 202.174.120.2 at 2013-01-30 08:43:30 EST. ISI Emerging Markets. Unauthorized Distribution Prohibited.

resins, sulfones having wide range of applications in different industries including personal care, pharmaceuticals, dyestuff, paper, tyre, textile, agriculture, aerospace etc. Atul enjoys fair amount of market share in many of these product segments around the world. Shift in Business mix leading to sustained improvement in profitability Atul was one of the largest dyestuff manufacturing companies in India and over a period, through strong R&D, joint venture (JV) with multinationals and acquisitions, Atul expanded its product portfolio significantly in the area of aromatics, crop protection, pharma & intermediates and polymers which are speciality products providing better profitability. Significant capacity addition over the last three years has resulted into substantial increase in the scale of its operations of these high margin products. Improvement in overall financial risk profile There has been consistent improvement in the financial risk profile of Atul over the last few years. Healthy cash generations owing to strong revenue growth and better profitability led to improvement in capital structure, overall gearing and debt protection indicators. Working capital cycle has also improved with efficient working capital management despite diversified product portfolio. Liquidity position has also remained comfortable as marked by healthy current ratio and low working capital utilization and good financial flexibility marked by high liquid investments. Exposure to raw material price fluctuations & exchange rate volatility Most of the raw materials of Atul are derivatives of crude and as such their prices vary with the fluctuations in international crude oil prices. Besides Atul is also exposed to exchange fluctuation risk to some extent. However, Atul has natural hedge to a large extent as exports form substantial part of its sales (42% in FY11 as against import of around 37% of its total raw material requirement during the year). During FY11, against total foreign exchange inflow of Rs.651 crore, foreign exchange outflow was Rs.333 crore which reflects partial hedging of currency risk. Atul also follows the practice of hedging its receivables which mitigates the currency fluctuation risk to a large extent. Acquisition of brand and Implementation of projects in various divisions Looking at the demand, Atul has taken up projects in various areas of its business. It has acquired Rubber and Polyurethane Adhesives business and brand Polygrip. Atul is in the process of integrating the acquired business with that of its Polymers division. It also plans to commission p-Cresol project of 8000 tpa. Also, it has planned to implement projects in Aromatics, Crop protection and color divisions. The projects are envisaged to be implemented in the next two years viz. FY12 & FY13 at a envisaged total project cost of Rs.133 crore to be partly funded through debt of Rs.83.00 crore. Prospects The prospects of Atul would be driven by the initiatives taken by it for technological up-gradation, innovation of new products and mitigating risk related to fluctuation in input costs by moving towards more value-added products. Financial Performance Y.E. Mar.31, Working Results Net Sales Income from Operations PBILDT Depreciation Interest PBT PAT (After def Tax) Gross Cash Accruals Financial Position Equity Share capital Net Worth 2009 A 1161.53 1190.31 114.67 31.72 41.03 47.99 37.87 71.20 29.68 363.01 2010 A 1167.05 1194.71 137.65 37.30 25.56 83.77 56.81 98.97 29.68 394.96 (Rs. crore) 2011 A 1508.39 1542.52 183.97 38.54 25.46 133.17 90.00 129.02 29.68 480.77

ISIEmergingMarketsPDF in-isb from 202.174.120.2 on 2013-01-30 08:43:30 EST. DownloadPDF. Downloaded by in-isb from 202.174.120.2 at 2013-01-30 08:43:30 EST. ISI Emerging Markets. Unauthorized Distribution Prohibited.


Y.E. Mar.31,

2009 A 760.80 2010 A 702.83 2011 A 823.55

Total Capital employed Key Ratios Growth (%) Growth in Total Operating income Growth in PAT (after Def. Tax) Profitability (%) PBILDT / Total OI APAT / Total OI ROCE Average cost of borrowings Solvency(times) Long term Debt Equity Ratio Overall Gearing (Incl. Acceptances) Interest coverage (PBILDT/Interest) Term Debt/GCA (years) Liquidity (times) Current ratio Quick ratio Turnover (days) Avg. Collection Period Avg. Inventory Period Avg. Creditors Period Operating cycle
DISCLAIMER

15.28 3.41 9.63 3.18 12.19 10.31 0.77 1.09 2.79 4.50 1.81 1.17 73 71 66 78

0.37 50.01 11.52 4.76 14.47 7.27 0.53 0.78 5.39 2.42 1.38 0.91 71 73 66 78

29.11 58.42 11.93 5.83 20.78 7.85 0.32 0.71 7.23 1.40 1.35 0.87 64 66 68 62

CAREs ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.

ISIEmergingMarketsPDF in-isb from 202.174.120.2 on 2013-01-30 08:43:30 EST. DownloadPDF. Downloaded by in-isb from 202.174.120.2 at 2013-01-30 08:43:30 EST. ISI Emerging Markets. Unauthorized Distribution Prohibited.

CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:

HEAD OFFICE: MUMBAI

Mr. D.R. Dogra Managing Director Cell : +91-98204 16002 E-mail : dr.dogra@careratings.com Mr. P N Sathees Kumar Executive Vice President Marketing Mobile: +91-9820416004 mail:sathees.kumar@careratings.com Mr. Rajesh Mokashi Dy. Managing Director Cell : +91-98204 16001 E-mail: rajesh.mokashi@careratings.com Mr. Ankur Sachdeva Vice President Marketing (SME) Mobile: +91-9819698985 E-mail: ankur.sachdeva@careratings.com

4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai 400 022 Tel.: (022) 67543456 Fax: (022) 67543457 Website: www.careratings.com

OFFICES
Mr.Mehul Pandya Regional Manager 32 TITANIUM Prahaladnagar Corporate Road, Satellite, Ahmedabad - 380 015. Tel: 079 4026 5656 Mobile: 98242 56265 E-mail: mehul.pandya@careratings.com Mr. Pradeep Kumar Regional Manager Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai - 600 002. Tel: 044 2849 7812/2849 0811 Mobile: 98407 54521 E-mail: Pradeep.kumar@careratings.com Mr. Sukanta Nag Regional Manager 3rd Floor, Prasad Chambers (Shagun Mall Building) 10A, Shakespeare Sarani Kolkata - 700 071. Tel: 033 2283 1800/1803 Mobile: 98311 70075 E-mail: sukanta.nag@careratings.com Mr.Sundara Vathanan Regional Manager Unit No. 8, I floor, Commander's Place No. 6, Raja Ram Mohan Roy Road, Richmond Circle, Bangalore - 560 025. Tel: 080 2211 7140 Mobile: 98803 60878 E-mail: sundara.vathanan@careratings.com Mr. Ashwini Jani Regional Manager 401, Ashoka Scintilla 3-6-520, Himayat Nagar Hyderabad - 500 029. Tel: 040 40102030 Mobile: 91600 74789 E-mail: ashwini.jani@careratings.com Ms.Swati Agrawal Regional Manager 3rd floor, B-47, Inner Circle Near Plaza Cinema Connaught Place New Delhi 110 001. Tel: 011 2331 8701/2371 6199 Mobile: 98117 45677 E-mail: swati.agrawal@careratings.com

ISIEmergingMarketsPDF in-isb from 202.174.120.2 on 2013-01-30 08:43:30 EST. DownloadPDF. Downloaded by in-isb from 202.174.120.2 at 2013-01-30 08:43:30 EST. ISI Emerging Markets. Unauthorized Distribution Prohibited.