India RCF surges 15% as ICRA reaffirms ratings with positive outlook

The revision in outlook to ‘Positive’ factors in the disbursal of additional subsidy announced under the Atma Nirbhar Bharat Package 3.0 for the fertilizer sector which is expected to reduce the subsidy arrears of RCF which would, in turn, lead to decline in short-term borrowings and interest costs and consequently, strengthen the debt coverage metrics, ICRA said in rating rationale.

RCF is in discussion with the Department of Fertilisers (DoF) for consideration of minimum fixed of Rs 2,300 /MT and any resolution in favour of the company would further strengthen its profitability and liquidity position. ICRA also notes the healthy operating profits registered by industrial chemicals segment in 9M FY2021 because of lower cost of production owing to better energy efficiency and decline in natural gas prices, it said.

ICRA further said the ratings continue to factor in the high financial flexibility of the company by virtue of the large sovereign ownership and its ability to access debt markets at competitive rates to support its liquidity profile. The ratings also factor in the established position of RCF as one of the largest urea manufacturers in India having vertically integrated operations in fertilisers and chemicals coupled with healthy operating efficiency of the company’s urea operations reflected in high plant utilisation levels.