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Issuer Rating CARE AA+ (Is)

Rating (GL) & leather chemicals and providing various service

based activities such as logistics infrastructure &
CARE has upgraded the Issuer rating of Balmer Lawrie
services (LIS), travel & tours (TT), container freight and
& Co. ltd. (BLCL) from the existing ‘CARE AA (Is)’
tea blending & packaging. It is a well diversified, multi-
[Double A (Issuer rating)] to ‘CARE AA+ (Is)’ [Double A
location and multi-product medium sized conglomerate
plus (Issuer rating)]. The rating is only an opinion on
with major activities being IP, GL, LIS and TT. Most of
the general creditworthiness of the rated entity and not
its manufacturing and service units have ISO
specific to any particular debt instrument. Issuers with
this rating are considered to offer high safety for timely
servicing of debt obligations. Such issuers carry very Operations
low credit risk. CARE assigns ‘+’ or ‘-’ signs to be shown
after the assigned rating (wherever necessary) to The business portfolio of BLCL comprises both
indicate the relative position within the band covered manufacturing operations as well as rendering services.
by the rating symbol. On the manufacturing front, it is mainly engaged in
manufacturing of IP products (mild steel barrels, mild
The rating takes into account long & satisfactory track record steel drums, etc.) and GL (predominantly industrial
of the company, Government of India’s controlling equity lubricants). On the service front, which constitutes the
stake in the company, professional and highly qualified major business activity, the company offers services
management team, pan-India presence with diversified mainly in the LIS (offering air and ocean freight services,
business portfolio entitling it to have the advantage of a custom house agencies, ware housing, surface
conglomerate, strong & reputed clientele, steady transportation, Container Freight Stations etc.) and TT
performance of most of the SBUs during the last few years, (mainly ticketing and arranging tours) segments. These
comfortable financial position with very low gearing ratios, four activities, in aggregate, contributed about 93-95%
highly satisfactory interest coverage, substantial real estate of the gross turnover during the last three years. Each
properties in prime localities and comfortable liquidity of the activities operates as a SBU (Strategic Business
position with decent level of cash balances. The rating is Unit) and mainly caters to the PSUs, private corporates
however, constrained by some of the SBUs operating in and Government departments.
mature market segment, volatility in input prices and
company operating mostly in relatively lower margin The capacity utilisation of GL SBU has been on the lower
business segments. Ability of BLCL to identify other revenue side since the last three years. During FY09, although
streams and enter lucrative business segments would BLCL increased the capacity of its GL, the production
remain the key rating sensitivities. level of the same decreased by about 10% from FY08.
This was due to intense competition in the segment
Background resulting in dilution of market share amongst the players
Balmer Lawrie & Co. Ltd. (BLCL), established in 1867 and the oil majors (BPCL, HPCL & IOC), the main
is a ‘Miniratna - 1’ central PSU under the administrative customers, having increased the in-house capacities.
control of Ministry of Petroleum & Natural Gas, Both installed capacity and capacity utilisation of the IP
Government of India (GoI), since 1972. The controlling SBU declined during FY09, due to low demand emerging
stake (61.8%) of the company is being held by Balmer from the segment.
Lawrie Investments Ltd., a GoI enterprise. Gross turnover registered a y-o-y growth of about 13%
BLCL is engaged in manufacturing of steel barrels for in FY09 over FY08 due to increase in turnover of all the
industrial packaging (IP) products, greases & lubricants major SBUs. The turnover of the service oriented SBUs


continued to increase by relatively higher proportion than Financials Result
that of the manufacturing ones. While TT and LIS were (Rs. In crore)
the major contributors to the total income, LIS was the For the year ended/ As on Mar. 31 2007 2008 2009
major contributor to PAT of the company in FY09.
The turnover of the LIS-SBU witnessed 21% y-o-y Working Results
growth in FY09, due to increase in operational efficiency Total income 1,299.1 1,484.6 1,694.4
achieved by the company and gradual shifting to private
Total operating Income 1,288.0 1,456.8 1,664.8
sector clientele (fetching higher realisation). However,
PBILDT 116.7 121.8 140.9
the margins declined marginally due to increase in the
Interest 3.7 3.0 5.2
cost of operation. TT was the highest contributor to the
Depreciation 11.8 12.8 10.5
turnover, contributing about 40%. The turnover and
PBILDT of the segment registered a y-o-y growth of PBT 106.1 130.5 151.6
18.8% and 27.0% respectively in FY09. This was on PAT (after defd. tax) 70.2 87.0 101.6
account of a travel scheme announced by GoI, whereby Gross Cash Accruals (GCA) 83.6 92.2 103.6
any PSU employees traveling to the North–East India Financial Position
by air could avail the Leave Travel Allowance (LTA), and Equity share capital 16.3 16.3 16.3
high commission income earned (due to high fares Tangible networth 291.8 338.7 393.6
prevalent in the airline industry). Increase in business
Total capital employed 315.0 354.8 401.4
volume subdued the impact of the Zero Commission
Scheme implemented by the major airlines, whereby Key Ratios (%)
they had reduced the commission payable to agents to Growth
zero from existing 3-5% (the same was however, Growth in Total income 3.88 13.10 14.28
withdrawn from Jan. 2009). PBILDT margins also Growth in PAT (after defd. tax) 50.01 23.95 16.77
improved accordingly. Profitability (%)
While the turnover of IP-SBU increased by about 9.2% PBILDT margin 9.06 8.36 8.46
in FY09 over FY08, PBILDT level witnessed a decline PAT margin – after defd. tax 5.40 5.86 6.00
of 20% owing to significant increase in steel prices in ROCE (operating) 38.75 37.43 40.17
the first half of FY09. Even though most of the Solvency
agreements for supply of barrels & drums had price Long term debt equity ratio (times) 0.08 0.05 0.02
escalation clause, there was a time lag in passing on
Overall gearing ratio (times) 0.08 0.05 0.02
the increase in raw material prices. Consequently,
Interest coverage (times) 27.37 35.88 25.13
PBILDT margin witnessed a decline. The turnover of
Term debt/ GCA (years) 0.28 0.17 0.07
GL-SBU witnessed the lowest growth among all others
(about 7%). However, there was increase in conversion Liquidity (times)
income in the segment. Lower revenue growth coupled Current ratio 1.33 1.35 1.39
with increase in base oil prices during FY09 (which Quick ratio 1.05 1.12 1.21
subsequently reduced in H2FY09 due to falling crude Turnover (days)
oil prices) resulted in decline in PBILDT level by 16.67%.
Average collection period 51 53 50
However, the company has adopted aggressive
Average creditors period 72 72 73
marketing campaign to garner additional revenue from
Average inventory period 25 23 20
the segment. Going forward, it plans to cater to the
requirement of the automobile segment, which is likely Adjustments
to generate 50% of the revenue for the company. • The liability in respect of invocation of corporate guarantee given by
BLCL to Oil Industrial Development Board (OIDB) for loan given by
The company mainly caters to the PSUs, private
OIDB to Indian Marine Freight Container Manufacturing Limited
corporates and Government departments. It has a strong (IMFCML) - a joint venture company of BLCL, has been taken as a
clientele comprising central PSUs & oil companies, part of long-term debt of BLCL to the extent payable after 12 months.
ISRO, defence entities, Reliance, amongst others. The remaining portion has been taken as a part of current liability.

Cost of services is the single largest contributor to the 2008) lying in bank fixed deposits, as on March 31, 2009.
operating costs (constituting about 59% of the total cost The company, by and large, maintains similar level of
of sales in the last three years). It increased by 15.3% fixed deposits, as of now. Average utilization of bank
in FY09 over FY08 mainly due to increase in the fare/ limit during the last one year was around 15%. BLCL
freight rates in the country (triggered by rising fuel also has substantial real estate properties in prime
prices) during the year. Raw material consumption cost localities of the country which is likely to provide cushion
was the second major cost constituting about 27% of to the company, in the event of any stress.
total cost of sales during the last three years. Iron &
In H1FY10, while net sales declined by about 8.5% from
steel materials and Lubricating Base Oil constitute major
HIFY09 (due to lower turnover in the LIS and TT
raw materials consumed (about 77% of the total raw
segments), PBILDT grew by about 5% mainly on account
materials consumed in FY09) and thus BLCL is directly
of higher revenue from the IP and GL segments.
affected by the volatility in the input prices of the same.
Increase in PBILDT coupled with decline in interest
However, most of the contracts of IP- SBU have price
charge led to higher increase in PAT during the same
escalation clause which enables the company to pass
period. Consequently, profitability margins also
on the hike in raw material prices to the consumers.
Ongoing Projects
Industry Outlook & Prospects
BLCL is expanding its Container Freight Station (CFS)
India emphasises significantly on logistics, as indicated
in Mumbai and Chennai, at an aggregate cost of Rs.38.0
by the fact that 13% of GDP is spent on this segment,
crore, being financed out of internal accruals. Expansion
compared to an average of 10% in other developing
work at CFS, Chennai is expected to be completed by
countries. The domestic logistics industry suffers from
January 2010. CFS at Mumbai is on the verge of
inadequate infrastructure, lack of technological
receiving allotment of land from The City & Industrial
developments and complex tax laws. GoI, is now,
Development Corporation of Maharashtra Ltd. (CIDCO)
emphasising on developing road infrastructure which,
and the project completion is expected to be over by
in turn, is likely to benefit the industry to a great extent.
FY11. The company has also decided to consolidate its
operations at Mumbai, Silvassa and Taloja units of GL The domestic TT segment is one of the fastest growing
SBU, at Silvassa. Further, it is exploring various other segments, contributing over 6% of the country’s GDP.
business possibilities as well. This segment witnessed massive expansion during the
last few years owing to increased worldwide interest
Financial Performance
in travel, governments’ encouragement to tourism,
BLCL’s net sales increased by 13.7% in FY09, mainly increase in affordability of international holidays and
due to growth in revenues from the TT and LIS SBUs. low domestic air tariff, which however, has been on
PBILDT increased by 15.7% in FY09, due to higher the higher side, since the past one year. One of the
volume of business from TT segment and high other major income source of the segment (commission
operating income (particularly interest on advances/ income), was hugely affected during the year due to
deposits). Increase in PBILDT coupled with almost same the announcement of zero commission regimes,
level of capital charge led to an improvement in PAT whereby some airlines have stopped paying
(after defd. tax) level & margin. commission to the agents for booking tickets and other
Both overall gearing and long term debt-equity ratios airlines have whittled down the commission rates
were almost nil as on Mar. 31, 2009. The term loan progressively, from 9% to 5%, before eliminating them
balance outstanding as on March 31, 2009 represented altogether. Subsequently, the agents appealed to
payment towards guarantee given by BLCL to Indian Directorate General of Civil Aviation (DGCA) to look
Marine Freight Container Manufacturing Limited into the matter and the same was withdrawn from Jan.
(IMFCML). Interest coverage & GCA remained very 2009.
comfortable in FY09. The domestic GL industry, the sixth largest in the world
The liquidity position of the company was satisfactory is bifurcated into industrial and automotive division, with
with current ratio being 1.39 and an aggregate amount the PSU’s dominating the industrial segment. The GL
of about Rs.200 crore (against Rs.80 crore as on Mar.31, market has seen several phases of turmoil, in the last


five years, and the same is expected to continue for The major consumer industry for the IP segment (barrels
some more years to come. In the long run, technology and drums) include lubricating oils and greases,
is expected to be a major differentiating factor and transformer oil, chemicals, paints, food products, etc.
companies with proven source of premium quality base However, the industry needs to look beyond its existing
stocks, sound R&D set-up, wide distribution network and market and in the long run; widespread market reach,
professionalised technical services will continue to large volume, competitive pricing & access to alternate
survive in this industry. markets will be the major survival factors.

November 2009

CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned
bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by
it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information
and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities
whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank

CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:


Mr. D.R. Dogra Mr. Rajesh Mokashi
Managing Director Dy. Managing Director
Cell : +91-98204 16002 Cell : +91-98204 16001
E-mail : dr.dogra@careratings.com E-mail: rajesh.mokashi@careratings.com

Mr. Ankur Sachdeva

Head - Business Development
Cell : +91-9819698985
E-mail: ankur.sachdeva@careratings.com

4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway,
Sion (East), Mumbai 400 022 Tel.: (022) 67543456 Fax: (022) 67543457
Website: www.careratings.com


Mr.Mehul Pandya Mr.Sundara Vathanan

Regional Manager Regional Manager
32 TITANIUM No.G1, Canopy Royal Manor,
Prahaladnagar Corporate Road, Near Manipal Hospital,
Satellite, Rustombagh, Off Airport Road,
Ahmedabad - 380 015. Bangalore - 560 017.
Tel - 079 4026 5656 Tel - 080 2520 5575
Mobile - 98242 56265 Mobile - 98803 60878
E-mail: mehul.pandya@careratings.com E-mail: sundara.vathanan@careratings.com

Mr.Ashwini Jani Mr. Rahul Patni

Regional Manager Regional Manager
Unit No. O-509/C, Spencer Plaza, 401, Ashoka Scintilla
5th Floor, No. 769, 3-6-520, Himayat Nagar
Anna Salai, Hyderabad - 500 029
Chennai 600 002 Tel - 040 4010 2030
Tel: 044 2849 7812/2849 0811 Mobile - 91600 04563
Mobile - 91766 47599 E-mail: rahul.patni@careratings.com
E-mail :ashwini.jani@careratings.com

Mr. Sukanta Nag Ms. Swati Agrawal

Regional Manager Regional Manager
3rd Floor, Prasad Chambers 710 Surya Kiran,
(Shagun Mall Building) 19 K.G. Road,
10A, Shakespeare Sarani New Delhi - 110 001.
Kolkata - 700 071. Tel - 011 2331 8701/2371 6199
Tel - 033 2283 1800/1803 Mobile - 98117 45677
Mobile - 98311 70075 E-mail :swati.agrawal@careratings.com
E- mail: sukanta.nag@careratings.com