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Moody's affirms Tata Chemicals Ba2 ratings; outlook remains stable
27 November 2012

Mumbai: Moody's Investors Service, a leading provider of credit ratings, research, and risk analysis and a part of Moody's Corporation – the parent company, affirms Tata Chemicals' (TCL) Ba2 corporate family rating and maintains the stable outlook.

Moody's acknowledged that TCL's performance in recent years has benefited from steady growth derived from both acquisitions and organic expansion while maintaining an adjusted EBITDA margin of more than 17 percent. While this level of margin is strong for its rating category, its balance sheet and liquidity profile are commensurate with a Ba range rating.

The company's global acquisitions have provided given scale and geographic diversification to the group's soda ash and salt businesses, and TCL is the world's second largest producer of soda ash. Approximately 60 percent of group EBITDA is generated by its inorganic chemical operations. acquisitions in this area, which include US-based General Chemicals Industrial Products (acquired 2008) while its European business has been built on the purchases of Brunner Mond (acquired 2006) and British Salt (acquired 2011).

TCL has considered large-scale expansion of its existing urea plant in India, which would help to reduce the country's imports of the fertiliser, but the supply of natural gas has been a stumbling block. Moody's expects TCL to continue at its current brisk rate of growth with further small investments to bolster existing activities and continuing cost reduction and productivity improvements.

TCL's working capital requirements are highly correlated with movements in raw material costs, selling price and seasonality. TCL supports these with various fund and non-fund credit lines which are adequate in size. The Tata group has subscribed to preferential share placings made by TCL. As part of the Tata group, Moody's expects TCL to enjoy continued, favourable access to bank facilities.

Commenting on the rating, P K Ghose, executive director and chief financial officer, Tata Chemicals Ltd., said, "We respect Moody's rating of our company and are happy that it has been recognised that despite adverse market conditions, our company has exhibited steady growth. Going forward too, we expect the Indian market to continue the growth momentum. We're also positive that our diversity in product portfolio will help reduce volatility and balance our earnings in the future."