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| Fitch Assigns 'BB(ind)'/'F4 (ind)' to India's SSA International's Bank Loans |
| Announcement / Banking Apr 29, 2009, 20:02 IST |
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Fitch Ratings has today assigned India's SSA International Limited (SSA) a National Long-term rating of 'BB(ind)'. Simultaneously, the agency has assigned ratings of 'BB(ind)' to its outstanding term loans aggregating INR307.3m, 'BB(ind)'/'F4(ind)' to its fund based working capital limits amounting to INR1800m and 'BB(ind)'/'F4(ind)' to its non-fund based working capital limits amounting to INR225m. The Outlook is Stable.
SSA's ratings reflect its established track record in paddy processing and rice export markets. The ratings are underpinned by company's consistent growth and revenues during FY04-FY08.
The key concerns for the ratings emanate from SSA's small scale of operations, a very high concentration risk in the export market and low brand recall. Fitch notes that India's rice milling industry is very working capital intensive and is susceptible to fluctuating raw material prices and vagaries of monsoons. The industry is subject to intervention by regulatory authorities by way of policy changes. The agency also notes that the rice industry historically is a low margin business.
In FY08, SSA recorded total revenues of INR3,779m and operating EBITDA of INR171m. The company's operating EBITDA margins and net margins stood at 4.5% and 1.3%, respectively, and its total adjusted debt net of cash/Operating EBITDA stood at 7.1x in FY08. In 9M08 the company achieved sales of INR3,313.9m with an EBITDA margin of 5.6% and net margin of 2.6%.
A positive ratings trigger would include a substantial reduction in financial leverage in the medium-to-long term while establishing a track record of consistent performance. However, any debt-funded capex resulting in the deterioration of its financial leverage coupled with non-improvement in its financial performance and adverse policy changes by regulatory authorities will adversely affect its ratings.
Incorporated in February 1995, SSA is a 100% subsidiary of Samtex Fashions Limited. The company has a rice milling facility at Samalkha with paddy milling capacity of 17 metric tonnes per hour (MTPH) and rice bran milling capacity of 100 metric tonnes per day (MTPD). During FY09, SSA successfully set up a 9MTPH paddy milling plant in Mandideep with a total capital outlay of INR292.6m. The plant has been recently commissioned in February 2009.
Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(ind)' for National ratings in India. Specific letter grades are not therefore internationally comparable.
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.
Fitch Ratings is one of the three large global credit rating agencies. Fitch rates 6000 financial institutions, including some 3,200 banks and 2,400 insurance companies, more than 1,700 corporates and 100 sovereigns as well as public finance, sub-sovereigns and structured finance transactions.
Fitch India has four rating offices located at Mumbai, Delhi, Chennai and Kolkata. Fitch is recognised by Reserve Bank of India, Securities Exchange Board of India (SEBI) and National Housing Bank.
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