(The following statement was released by the rating agency)
May 30 - Fitch Ratings has assigned India-based Tamilnadu Waste Management Limited’s (TNWML) bank loans ‘Fitch A(SO)(ind)'/‘Fitch A1(SO)(ind)’ ratings. A full rating breakdown is provided below.
The ratings are based solely on the unconditional and irrevocable corporate guarantee extended by TNWML’s parent company, Ramky Enviro Engineers Limited (REEL), for the rated loans.
As per REEL’s provisional consolidated FY11 (year-end March) figures, revenue increased to INR10.29bn (FY10: INR4.97bn), though EBITDA margins declined to 24.4% (28.6%). FY11 was the first full year of operations of REEL’s Singapore operations, which provided for steady but low EBITDA margins of 7%-8%. Margins from other businesses were around 30%, and the increasing proportion of these businesses is likely to improve REEL’s margins. REEL has an engineering, procurement and construction order book of INR9.3bn to be executed over the next three years. Total adjusted debt was INR4,060.8m (FY10: INR2,855.4m) and net financial leverage was 1.48x (1.8x).
REEL and its subsidiaries have a capex plan of over INR17bn for the next three years. This includes two waste energy power plants with a combined capacity of 72MW in Delhi and Hyderabad. As this capex is expected to be funded predominantly by debt, leverage should increase over the medium term.
TNWML’s ratings may be upgraded if REEL is able to complete a significant portion of the capex while maintaining its current credit profile, on a sustained basis. Conversely, the ratings may be downgraded if adjusted net debt/ EBITDA exceeds 2.5x on a sustained basis.
TNWML is an SPV of REEL formed to develop an integrated hazardous waste management facility on build-own-operate (BOO) basis in SIPCOT Export Promotion Industrial Park in Chennai. It has been operational since November 2007. In FY11, TNWML had operating income of INR339m, and operating EBITDA of INR149m. Total debt outstanding as at FYE11 was INR171m. TNWML is currently spending INR341m to build landfills and green-belts, funded by INR250m of debt.
TNWML’s loans and ratings are as follows:
INR90m fund-based working capital limits ratings: rated at ‘Fitch A(SO)(ind)'/‘Fitch A1(SO)(ind)’ INR10m non-fund based limits: rated at ‘Fitch A1(SO)(ind)’
INR382.5m term loans: rated at ‘Fitch A(SO)(ind)’