Sandvik Asia rating reaffirmed

ICRA has reaffirmed the LA plus rating assigned to the non- convertible debenture programme of Sandvik Asia, indicating adequate safety. The rating agency has also reaffirmed the A1 plus rating assigned to the commercial paper programme of Sandvik Asia, indicating highest safety in the short term. The rating takes into account the SAL's dominant market position in the domestic cutting tools business and its strong parentage. The rating also factors in the comfortable gearing and coverage ratios of the company. The rating also takes into consideration the downturn in the domestic user industries and the merger of group company Titex India (TIL) with SAL with effect from January 1, 2001. The increased stake of Sandvik AB of Sweden in SAL is expected to increase SAL's access to the former's product range and technology resulting in its improved competitiveness in the domestic markets.

SAL's operating income (OI) increased by 25 per cent to Rs. 199 crores in 2000. Subsequent to the company's restructuring in 1998, it's operating margins had improved in 1999 and 2000. Improved profitability translated into healthy interest coverage of 4.49 times. Gearing as on December 31, 2000 stood at 0.59 times. However, operating margins came under pressure in the first quarter of 2001, due to the down turn in the user industries.

TIL, promoted by Sandvik AB and SAL in 1997, for the manufacture of solid carbide tools, taps and drills was merged with SAL with effect from January 1, 2001. TIL's product range would add to SAL's product profile.

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Section  : Business
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