Credit Analysis and Research Limited (CARE), a premiere Rating Agency in the country has upgraded the Long Term Rating of JK Lakshmi Cement Limited from A+ to AA- for their entire Long Term Banking Facility. The Rating indicates that the facility offer High Safety for Timely Servicing of the Debt Obligation and carry very Low Credit Risk.
The up-gradation in the Rating has come in the backdrop of consistently excellent Financial Results being announced by JK Lakshmi Cement, Quarter after Quarter. The Company had recorded Gross Revenue of Rs 379 crore in the Quarter ended 30th September, 2009 as against Rs 343 crore recorded in the Corresponding Quarter of last year.
The Operating Profit for the Quarter more than doubled to Rs 117 crore as against Rs 57 crore recorded in the Corresponding Quarter of the last year. The Profit Before Tax more than tripled to Rs 90.77 crore during the Quarter as against Rs 27 crore recorded in the Corresponding Quarter of the last year.
The Company has long term debt of Rs 570 crore and has Cash Equivalent Liquidity in the Company of Rs 460 crore as on 30th September, 2009, and it has tied up additional 21 MW of Power from a Private source at a fixed tariff of Rs. 3.30 per unit for 20 years. This shall result in annualized savings of Rs 15-20 crore to the Company.
The Company is augmenting its Captive Power Capacity from 36 MW to 66 MW. The Company is also putting up a split location Grinding Unit of 5.50 lac tonnes in Northern Market to save on logistics cost and come closer to its customers.
Further, the Company is also planning to set up a Greenfield Cement Plant of 2.7 million tonnes at Durg in Chhattisgarh, for which the land acquisition process is in progress. The Project shall cost Rs 1200 crore and shall be funded through internal accruals of Rs 400 crore and debt of Rs 800 crore. The upgraded long-term rating shall enable it to raise the funds at lower cost. With this, the Company’s Cement Capacity shall go up from 4.75 Million Tonnes to 8 Million Tonnes by 2012-13.
Based on the excellent Financial Results, the Company has announced an Interim Dividend of 20% on its Equity Shares. The Board has also decided to split one Equity Share of Rs. 10/- each into two Equity Shares of Rs. 5/- each to increase market float and to facilitate small investors to participate in Company’s growth.
The rating revision came at a time when the downward sentiments have started appearing for the sector. i can only say go cautious on cement stocks. They have seen wonderful figures till sept. 09, that makes them more vulnerable to any change in the scenario. Presently an oversupply scenario has created a panic among the players leading prices downward. Also Ambuja/ACC’s decision to skip cma may adversely affect the joint working of all manufacturers towards the one goal.
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