<div><div><em><strong>The company's Ebita margin has improved due to global fall in crude oil prices, writes Arshad Khan</strong></em><br><br>Rating agency India Ratings and Research has upgraded I G Petrochemicals Limited’s (IGPL) long-term issuer rating to 'IND A-’ from ‘IND BBB+’, maintaining a stable outlook for the petrochemical company. <br> </div><div>The rating agency gives reduction in total debt and an increase in EBITDA margins of the company as the prime reason for its up gradation.</div><div> </div><div>“IGPL’s EBITDA margin improved 165bp y-o-y to 6.7 per cent in FY15 due to the capex completion and process improvement initiatives taken in FY14. The rating agency expects the EBITDA margin to further improve in FY16 because of high demand of phthalic anhydride (PAN) and improved operational efficiency,” notes the agency in its report,</div><div> </div><div>Company’s EBITA margin also improved due to global fall in the prices of crude oil as its main raw material ortho-oxylene is a crude derivative.</div><div> </div><div>It is also exposed to forex risk as exports form 19 per cent of the total revenue and imported raw materials form 16 per cent of the total raw material consumption. IGPL partially hedges its exports as well as imports using forward covers apart from having a natural hedge, reducing the risk to an extent. </div><div> </div><div>The rating agency reports that the petrochemical company has started drawing benefits from capacity addition as well as process improvement initiatives like reducing furnace oil requirement and using generated steam to meet its power requirements.</div><div> </div><div>Other push by the company which improved its rating includes imposing of anti-dumping duty by the government of India which enabled IGPL to protect its margin. Positive cash flow form operation and maintaining moderate liquidity further helped the company to upgrade its rating.</div><div> </div><div>The rating agency further reports that company’s plan to raise Rs 400 million in FY16 and FY17to manufacture downstream speciality chemicals will enable IGPL to diversify its product portfolio. The agency expects the credit metrics to remain stable post this capex.</div></div>
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