Richard Pieris Debenture Issue

http://www.cse.lk/cmt/upload_cse_announcements/1091395826837_.pdf

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RAM Ratings Lanka has reaffirmed respective long- and short-term corporate credit ratings of AA- and P1 to Richard Pieris and Company (RPC). Concurrently, the long-term AA- rating has been assigned to the Company’s proposed LKR 3.5 billion listed unsecured redeemable debentures (2014/2019).

Both the long-term ratings carry a stable outlook. Richard Pieris is a diversified conglomerate with wide ranging business interests including retail, plantations, rubber, tyre, plastics and services.

The ratings are upheld by the Group’s diversified business interests. Having started operations in rubber related operations over 80 years ago, the Group has diversified largely via organic growth. 

Richard Pieris is currently one of the largest conglomerates in Sri Lanka, involved in a wide range of industries that include retail, plantations, rubber, tyre, plastics and other services. Notably, diversification has limited the Group’s overall revenue volatility over the years. Further, the ratings are also upheld by the Group’s strong market positions in key businesses.

The Group enjoys strong market positions in several of its key businesses. The Group is the market leader in plastics, tyre and plantation industries while having significant presence in retail which are the core business segments of the Group.

The Group is able to leverage on its retail brand name “Arpico” which is well known locally. In addition, the Group’s debt-protection metrics are also deemed above average despite high gearing levels. Despite a higher gearing levels of 1.09 times by 9M FY March 2014 (FY Mar 2013: 0.94 times), its funds from operations (“FFO”) debt coverage clocked in at 0.29 times at 9M FY Mar 2014 declining from FY Mar 2013’s levels of 0.43 times. Meanwhile, the Group’s operating cash flow to debt coverage improved to 0.42 times as at end-December 2013.

While the Group’s planned capital expenditure is mainly driven by plantations and retail segments which is expected to increase the gearing levels going forward, the Group’s FFO debt coverage levels are expected to improve to 0.35 times. Short-term debts accounted for 58% of the Group’s borrowings as at 9M FY Mar 2014, whereas the ratio of its cash and cash equivalents to short-term debts only up to 0.82 times, which mitigates our concerns on the gearing levels of the Group. 
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