RATING RATIONALE
19Aug2022

KIOCL Ltd.

Brickwork Ratings reaffirms the ratings and changes the outlook to Negative for the Bank Loan Facilities of Rs. 1050.00 Crs. of KIOCL Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(28 Jul 2021)
Present
Fund Based (5.00) (5.00) Long Term BWR AA-/Stable
Assignment
BWR AA - /Negative
Reaffirmation and change in Outlook
(6.00) (6.00)
(4.00) (4.00)
Non Fund Based 1050.00 1050.00 Short Term BWR A1+
Assignment
BWR A1 +
Reaffirmation
(70.00) (125.00)
(75.00) (30.00)
(15.00) (15.00)
(15.00) (15.00)
Grand Total 1050.00 1050.00 (Rupees One Thousand Fifty Crores Only)
#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure


RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) revises the outlook for KIOCL Limited (KIOCL or the company) considering the deterioration in the financial performance in Q1FY23 due to the imposition of export duty on iron ore pellets at 45%. The company’s ratings were reaffirmed at BWR AA- and BWR A1+ considering factors such as the established track record,  experienced and qualified management, minimal external debt, satisfactory financial performance up to FY22, and adequate liquidity position, coupled with high cash and bank balances in the form of term deposits. However, the company’s ratings are constrained by volatility in product prices and reliance on third-party mines, thereby leading to an increase in operating costs, exposure to currency fluctuations, and the recent imposition of export duty on the iron ore pellets.  BWR notes that the operations of the pellet unit were suspended on 07 Jun 2022 and the same has been resumed from 12 Aug 2022. 

The company’s outlook was revised to Negative considering the deterioration in the financial performance in Q1FY23 owing to the imposition of export duty on iron ore pellets at 45%. The outlook would be revised to Stable if the company recovers from the operating losses incurred in Q1FY23 and there is a favourable change in the export duty. 
 

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

To arrive at its ratings, BWR has relied on the company’s standalone financials. BWR has applied its rating methodology as detailed in the Rating Criteria. 

RATING SENSITIVITIES

LIQUIDITY INDICATORS - Adequate

The company has reported an adequate liquidity position.  KIOCL has no repayment obligations in FY23. During FY22 (audited), the company generated net cash accruals of Rs.344.59 Crs, and cash and cash equivalents were at Rs. 1107.58 Crs as on FY22. The company has non-fund-based limits, i.e., a letter of credit and bank guarantees, wherein the utilisation levels are less than 50% for  FY22. The company availed a term debt of Rs.9 crs during FY22 for the CAPEX planned for FY23 to FY25, for which the repayment obligations would commence from Q4FY26.  BWR expects that the liquidity continues to remain adequate in the medium term.

ABOUT THE ENTITY

KIOCL Limited (formerly Kudremukh Iron Ore Company Limited), a flagship company under the Ministry of Steel, GoI, was formed on 2 April 1976 for mining and the beneficiation of low-grade iron ore at Kudremukh, Karnataka, India. KIOCL is classified under the Mini Ratna category. KIOCL manufactures both blast furnaces and DR-grade pellets. KIOCL has the facilities to operate a 3.5 MTPA iron-oxide pellet plant, a blast furnace unit to manufacture 2.16 lakh tonnes of PA  pig iron at Mangalore, Karnataka. Apart from the manufacturing facilities, the company also operates in O&M extraction. KIOCL is a publicly listed entity, and the shares of the company are listed on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and MSEL (Metropolitan Stock Exchange of India Limited).

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 21-22
(Audited)
FY 20-21
(Audited)
Operating Revenue Rs.Crs. 3006.45 2386.91
EBITDA Rs.Crs. 380.13 361.95
PAT Rs.Crs. 313.41 301.17
Tangible Net Worth Rs.Crs. 1958.28 1980.36
Total Debt/Tangible Net Worth Times Not Available Not Available
Current Ratio Times 6.62 7.34
KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for bank loan facilities. 


STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Nil

ANY OTHER INFORMATION

Nil

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
Facilities Current Rating (2022) 2021 2020 2019
Type Tenure Amount
(Rs.Crs.)
Rating Date Rating Date Rating Date Rating
FB SubLimit LT (5.00)
BWR AA-/Negative
(Reaffirmation and change in Outlook)
28Jul2021
BWR AA-Stable
(Assignment)
NA
NA
NA
NA
(6.00)
BWR AA-/Negative
(Reaffirmation and change in Outlook)
NA
NA
NA
NA
NA
NA
(4.00)
BWR AA-/Negative
(Reaffirmation and change in Outlook)
NA
NA
NA
NA
NA
NA
Non Fund Based ST 1050.00
BWR A1+
(Reaffirmation)
28Jul2021
BWR A1+
(Assignment)
NA
NA
NA
NA
NFB SubLimit ST (125.00)
BWR A1+
(Reaffirmation)
NA
NA
NA
NA
NA
NA
(30.00)
BWR A1+
(Reaffirmation)
NA
NA
NA
NA
NA
NA
(15.00)
BWR A1+
(Reaffirmation)
NA
NA
NA
NA
NA
NA
(15.00)
BWR A1+
(Reaffirmation)
NA
NA
NA
NA
NA
NA
Grand Total 1050.00 (Rupees One Thousand Fifty Crores Only)
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria
Analytical Contacts

Sowmya Yatham

Manager - Ratings Board : +91 80 4040 9940 sowmya.y@brickworkratings.com

Vipula Sharma

Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
KIOCL Ltd.
ANNEXURE-I
Details of Bank Facilities rated by BWR
SL.No. Name of the Bank/Lender Type Of Facilities Long Term(Rs.Crs.) Short Term(Rs.Crs.) Total(Rs.Crs.)
1 HDFC Bank Letter of Credit _ 125.00 125.00
Sub-Limit (BG (Sublimit of LC)) (125.00)
2 HDFC Bank Forward Contract _ 25.00 25.00
3 ICICI Bank Letter of Credit _ 65.00 65.00
Sub-Limit (Overdraft (Sublimit of LC)) (5.00)
4 ICICI Bank Derivative Limit _ 15.00 15.00
5 IndusInd Bank Standby line of Credit (SLC) _ 5.00 5.00
6 IndusInd Bank Standby line of Credit (SLC) _ 10.00 10.00
7 IndusInd Bank Bank Guarantee _ 60.00 60.00
8 IndusInd Bank Letter of Credit _ 110.00 110.00
9 IndusInd Bank Forward Contract _ 15.00 15.00
10 Un tied portion BG/ILCProposed _ 520.00 520.00
11 Yes Bank Letter of Credit _ 75.00 75.00
Sub-Limit (Bank Guarantee) (30.00)
Sub-Limit (Cash Credit) (4.00)
Sub-Limit (Packing Credit (PCFC)/ INR EPC) (15.00)
Sub-Limit (Post Shipment Finance ) (15.00)
Sub-Limit (Working Capital Demand Loan) (6.00)
12 Yes Bank Forward Contract _ 25.00 25.00
Total 0.00 1050.00 1050.00
TOTAL (Rupees One Thousand Fifty Crores Only)
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