TEXT-Fitch afrms rtngs of BILT Graphic Paper Products; neg otlk

(The following statement was released by the rating agency)

May 25 - Fitch Ratings has today affirmed the National Long-term rating of 'AA-(ind)' for India's BILT Graphic Paper Products Limited (BGPPL). The agency has also assigned a 'AA-(ind)'/'F1+(ind)' rating to its enhanced fund based and non-fund based working capital limits of INR2000m. Meanwhile, the existing ratings of 'AA-(ind)'/'F1+(ind)' to its fund and non fund based working capital limits of INR3000m, and 'F1+(ind)' rating to its commercial paper program (within working capital limits) aggregating INR1500m, are also affirmed. The Outlook remains Negative.

This rating action commentary updates the rating commentary published on 30 January 2009.

BGPPL's ratings are driven by the strong operational and strategic linkages of the entity with its parent, Ballarpur Industries Limited (BILT.BO: Quote, Profile, Research) (BILT). While the legal ties between the two entities are weak, Fitch believes the overall linkages are strong as both have similar business profiles and a common management team. As a result, Fitch has equated the rating of BGPPL to that of BILT (please refer to Fitch's release, "Fitch Revises Outlook on Ballarpur Industries' to Negative; Assigns Rating to its Bank Loans" dated 30 January 2009).

The Negative Outlook reflects Fitch's expectation that the company's financial leverage will remain high in the medium-term, as commissioning of significant new capacities by BGPPL and lower growth in paper demand potentially result in lower utilisation levels; debt levels are also expected to remain high. Although the assigned ratings are compatible with the healthy profitability exhibited by the company, as well as the strengthening of its business profile in the long-term, a delay in improvement of financial leverage might lead to a ratings downgrade.

Leverage (Net Debt/EBIDTA) of above 4x in BILT's FYE09 consolidated financials as a result of either a decline in profitability or higher than anticipated debt would lead to a downgrade. On the other hand, financial leverage remaining below 4x at FYE09 consolidated financials with signs of improvement thereafter could result in the Outlook being revised to Stable.

BILT, part of the Avantha Group (the former Thapar Group), was incorporated in 1945. BGPPL was formed out of the demerger of BILT's production facilities into two separate companies, with BGPPL having ownership of three plants. BGPPL has 259500MT of coated paper and 98500MT of rayon grade pulp capacities. The company commissioned additional coated paper facility for 190,000MT in March 2009 and plans to convert rayon grade pulp facility to paper grade pulp from June 2009 onwards. According to 9MFY09 results, BGPPL's revenues stood at INR10.3bn and profitability (EBIDTA) was INR2.8bn. During the same period, BILT's consolidated revenues rose by 3.1% to INR21bn whereas profitability (EBIDTA) declined by 9.7% to INR4.8bn over previous year.