Fitch Ratings has today downgraded the rating of India’s Rajshree Sugars & Chemicals Limited’s (RSCL) INR600 million commercial paper programme from ‘F1(ind)’ to ‘F2(ind)’, and simultaneously withdrawn the rating. The company has confirmed there is no instrument outstanding under the rating. Fitch will no longer provide analytical coverage on the issuer.

The downgrade follows the below par operational performance of the company during the first nine months of FY08. Its revenues and EBITDA in the first nine months of FY08 were INR2.53 billion and INR130m (EBITDA margin was 5.1%, versus 23.7% in FY06 and 15% in FY07), respectively. Net loss during this period was INR16m. This compares with Fitch’s expectation of improved EBITDA margins, and hence credit metrics, on the back of anticipated stronger sugar prices in the Southern part of the country, which did not materialise. Fitch notes the lack of proper monitoring and risk management procedures with regards to managing foreign currency risk and exposures.

The company faces potential substantial losses on account of some of its foreign exchange derivatives exposures due to adverse market movements. The company has gone to court against its bankers on account of these transactions, and the matter is now subjudice. A ruling against the company will result in substantial fresh losses, and put further pressure on RSCL’s credit metrics beyond the current rating level.

RSCL is a medium-sized sugar company in South India with business interests in distillery and cogen. During FY07, RSCL reported revenues of INR4 billion (FY06:INR2.6bn), EBITDA of INR598m (FY06:INR613m) and net income of INR226m (FY06:INR316m). Debt/Equity and Debt/EBITDA were 2.1x (FY06:1.4x) and 3.6x (FY06:2.1x), respectively.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.

Sourced From: Sampark Public Relations Pvt Ltd

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