Hiranya Chemicals is issuing a five-year 9.5% bond from its holding company while its single plant and bank debt sit in a subsidiary, 60% of revenue is in dollars and promoters have pledged 40% of their shares. Identify every relevant risk and quantify the currency and structural ones.

Seven risks, two of which decide the credit: a rupee rally and the debt that ranks ahead of the bond. A 5% stronger rupee cuts EBITDA by Rs 60 crore, 15%, and lifts leverage to 3.3x; at 10% it is 4.0x. The bond is structurally behind Rs 420 crore of subsidiary debt: at 4x stressed EBITDA of Rs 280 crore the subsidiary is worth exactly enough to repay it, and at 3x the bond recovers about 60%. Add single-plant concentration, the promoter pledge, a bullet refinancing, chemical cycle pricing and dividend restrictions.

By where each one hits the bondholder, not alphabetically. Operating risks hit EBITDA, structural risks hit what share of EBITDA reaches the bond, and event risks hit whether the business is still there at maturity. A family lending to a cousin's shop asks the same three things: can the shop earn, does the money come to me or to the bank that holds the shop's keys, and could the shop burn down. For Hiranya: currency and the chemical price cycle hit EBITDA; structural subordinationLenders to a holding company rank behind the creditors of its subsidiaries, because the holding company only owns the shares. and dividend restrictions hit what reaches the holdco; a single plant, the promoter pledge and the bullet maturity are the events.

Size it on revenue, then watch it fall straight through to profit. Export revenue is 60% of Rs 2,000 crore, Rs 1,200 crore. A 5% rise in the rupee cuts that by Rs 60 crore, and because the plant's costs are in rupees, EBITDA falls from Rs 400 crore to Rs 340 crore, 15%, taking leverage from 2.8x to 3.3x; a 10% rise takes EBITDA to Rs 280 crore and leverage to 4.0x. Interest cover on all the debt falls from 3.8x to 2.7x. The questions to ask: what share of inputs is imported and so a natural hedge, what is hedged with forwards and how far out, and whether the dollar prices themselves move with the cycle, which would compound the hit.

Test what reaches the holdco in a stressed sale of the subsidiary. At 4x stressed EBITDA of Rs 280 crore the subsidiary is worth Rs 1,120 crore; its Rs 420 crore of bank debt is paid first, leaving Rs 700 crore, exactly the bond's face. At 3x, Rs 840 crore less 420 leaves Rs 420 crore, a 60% recovery. Day to day the risk is different: the Rs 66.5 crore coupon is paid only from dividends the subsidiary sends up, and its bank facilities will carry covenants that can block dividends in a bad year even when cash exists. Subsidiary free cash flow after capex, interest and tax is about Rs 212 crore today and Rs 122 crore with the rupee up 10%, so the cash is there; the question is whether the banks let it move.

Only with protections that fix the structure. Ask for a guarantee from the subsidiary so the bond ranks alongside the bank debt rather than behind it, a change of control put if the pledge is invoked, and a cap on subsidiary debt so Rs 420 crore cannot quietly become Rs 800 crore. With those, the credit is a 2.8x single-plant exporter at 9.5%, and the remaining judgement is the cycle and the currency. Without them, the bond is a bet on dividends from a company whose banks decide whether dividends are paid. Say the limit: the 4x and 3x sale values and the rupee moves are assumptions chosen to show the mechanics, and a real analysis would use the company's cost sheet and the current hedge book.