Crisil downgrades Essar Shipping

The revised rating also takes into account sustained fund requirement for the refinery project of Essar Oil and its impact on ESL, it said adding Essar Oil was downgraded to C8217; in April last.

Responding to the downgrading, Essar said in a statement that it has made suitable arrangements to to repay the first payment of principal amount which falls in mid-June. 8220;A major portion of debentures would be redeemed in the next two weeks while the balance of the debentures of Rs 75 crore will be redeemed in the next two years,8221; it said.

Asking the Crisil to reconsider its decision, it said that the downgrading of debentures 15 days prior to the repayment if principal and in the midst of a loan facility of Rs 510 crore certainly does not serve the interest of the company or of the debenture-holders in addition to giving wrong message to the debenture holders and public.

Though Essar Oil has recorded a fall in its net profit, Essar Shipping has registered a net profit of Rs 48.03 crore in the fiscal 1998-99, a 9 per cent increase over the previous year. The company says that this comes despite the decline of three per cent in total income, due to depressed market conditions. Total income stood at Rs 434.88 crore, while operating profit was Rs 249.16 crore.

The net profit growth excludes the profit of Rs 22.03 crore earned on the sale of ships. During the year under review, the company made a loss of Rs 2.27 crore from the sale of ships.

Essar Shipping reduced its operating expenses by 3 per cent to Rs 185.72 crore, while interest and finance charges have declined by 22 per cent to Rs 73.27 crore. About 41 per cent of the company8217;s income, Rs 175.16 crore, was earned in foreign exchange.

Earlier, Crisil had assigned P18217; to Rs 3.5 crore short term debenture programme and Rs 6.5 crore commercial programme of NRB Bearing Ltd. The rating reflects the company8217;s strong position in the needle roller bearing market, technical competence and moderate financial risk profile, Crisil said. The rating also takes into account NRB8217;s dependence on the automobile sector, which had put pressure on the earning8217;s and margins over the last two years.

Meanwhile, ICRA downgraded the Indbank Housing Ltd8217;s IBH, a subsidiary of Indian Bank8217;s fixed deposit programme from MA to MA- and put it under rating watch with developing implications. ICRA says that while IBH8217;s housing loans business continues to perform well, companies profitability has suffered due to the low yields on the inter-corporate deposits ICDs and lack of recognition of project loans, ICRA said.

The Indbank Housing8217;s cost of funds does not compare favourably with other housing finance firms. The profitability is expected to remain poor due to the provisioning requirements on ICDs and projects loan portfolio, ICRA added.

The mortgage of houses, the client-profile and the appraisal procedure would help to ensure a good payment record in the medium term.

IBH has minimised its exposure to corporates/project loan which is reflected in poor performance of its portfolio.