Fitch affirms 'A-' long-term rating on Bhushan Power

Ratings firm Fitch today said it has affirmed a low default risk on Bhushan Power & Steel Ltd (BPSL) long-term ratings, with a stable outlook on the back of the company's improved business profile and profitability.

"Fitch Ratings has affirmed India-based BPSL's national long-term rating at 'A-(ind)' with a stable outlook...The affirmations continue to reflect the consistent improvement in BPSL's business profile, resulting in improved profitability," it said in a statement.

The rating denotes expectations of low default risk relative to other issuers or obligations in the same country.

Fitch has also affirmed ratings denoting low default risk on one long-term and two short-term bank loans of BPSL, totalling over Rs 13,200 crore.

 

BPSL, formerly known as Bhushan Ltd, has plants at Chandigarh, Dera Bassi (Punjab), Kolkata and Sambalpur (Orissa).

Fitch said that the company's EBITDA margin has improved to 26.5% in the 2009-10 fiscal from 16.4% four years ago, due to lower input cost and benefits accruing from the third phase of its greenfield backward integration project in Orissa.

The project, which was completed in October 2009, has a capacity to manufacture 1.5 million tonnes of steel a year.

"The ratings derive comfort from the successful project execution track-record of the company," it said.

BPSL is currently implementing Phase-IV of the Orissa project at an investment of Rs 5,995 crore.

"The company will derive substantial benefits given operational efficiencies and reduction in freight costs by having both upstream and downstream facilities in one location... The Phase-IV is running as per schedule," Fitch said.

It added that once the new phase, with a capacity of 0.824 million tonne per annum is operationalised, BPSL's revenues and profitability are expected to rise further.

During the first nine months of 2010-11, BPSL recorded an increase of 20% in its net sales at Rs 2,662 crore.