Jain Irrigation rated B+

#S&P Global Ratings has assigned its preliminary ‘B+’ long-term corporate credit rating to #Jain Irrigation Systems Ltd on 17 Jan 2017. The outlook is stable.

At the same time, it has also assigned preliminary ‘B+’ rating to the proposed U.S. dollar notes to be issued by Jain International Trading BV and guaranteed by Jain Irrigation.

The rating on notes is subject to review of final issuance documentation.

Jain Irrigation is an India-based company manufacturing plastics-based micro irrigation piping and plumbing systems. The company also has a small but growing food processing business, which mainly produces fruit pulps and dehydrated onions.

#Jain International Trading BV is a wholly owned subsidiary of Jain Irrigation incorporated in the Netherlands.

“Our rating on Jain Irrigation reflects the company’s high leverage compared with peers’ and elongated working capital cycle, resulting in pressure on liquidity,” said S&P Global Ratings credit analyst #Ashutosh Sharma.

“The company’s business is exposed to cyclicality due to the variability in monsoons and seasonality in sales,” he said.

Jain Irrigation’s strong franchise with a dominant market position in India and second rank globally in the niche micro-irrigation systems market supports its credit profile.

S&P also expect leverage to reduce and liquidity pressure to subside with growth in business and management’s commitment to deleverage and reduce dependence on short-term working capital facilities.

“In our view, Jain Irrigation’s higher leverage than that of peers, such as #Valmont Industries Inc. and #The Toro Co., weighs down on its financial risk profile,” Sharma said.

“We believe Jain Irrigation’s micro irrigation and the piping systems business face stiff competition from small and midsize players in India, given that these businesses have lower barriers to entry, especially in emerging markets,” he said. fii—news.com