TEXT-Fitch afms Jubilant Organosys' loans at 'A+(ind)'/'F1+(ind)

(The following statement was released by the rating agency)

Dec 1 - Fitch Ratings has today affirmed Jubilant Organosys
Limited's (JUBO.BO: Quote, Profile, Research) (JOL's) National Long-term rating at
'A+(ind)'. The Outlook is Stable. At the same time, Fitch has
affirmed the National Short-term ratings assigned to its INR1bn
commercial paper (CP) and INR1bn short-term debt program (STD) at
'F1+(ind)'; these two programmes have now been combined and made
interchangeable to the full extent of INR2bn. The CP/STD program
is carved out of the company's fund-based working capital banking
lines. Fitch has simultaneously affirmed JOL's bank loan ratings
as follows:

-INR5,035.5m long-term bank loans at 'A+(ind)';

-INR3,000m fund-based working capital limits at
'A+(ind)'/'F1+(ind)'; and

-INR3,000m non fund-based limits at 'F1+(ind)'.

The ratings reflect the company's healthy business risk
profile, supported by its strong domestic market position in
Custom Research and Manufacturing Services (CRAMS) and other
industrial chemicals.

JOL's sales have grown at a compounded annual growth rate of
32% between FY05-FY09 on the back of both organic and inorganic
expansion in the pharmaceutical business. The company now has a
presence over the entire pharmaceutical value chain, from active
pharmaceutical ingredients (API), active intermediaries to dosage
forms.

The company has continued its focus on pharmaceutical exports
business, which contributes a significant portion of its sales
and cash accruals. In addition, JOL is insulated to some extent
from high crude oil prices, since a substantial number of its
products use molasses and alcohol as a raw materials, rather than
petroleum products. However, Fitch notes that the company
continues to remain vulnerable to raw material commodity cycles,
especially in the Industrial and Performance Products (IPP)
segment where it is difficult to pass cost increases on to
customers.

The rating is constrained by its high financial leverage,
aggressive inorganic growth strategy, and the price cyclicality
of industrial chemicals. Furthermore, JOL will face significant
debt repayments between FY10 and FY12. To reduce this risk, the
company has refinanced its existing debt in a way that no debt
repayments will need to be made at the standalone level when the
company's foreign currency converted bonds (FCCBs), aggregating
USD271.5m (including USD79.4m redemption premium) are set to be
redeemed in FY11 and FY12. While this may partly ease JOL's
re-financing pressures, but the agency believes liquidity will
remain tight especially in FY12, as the FCCB repayment amounts to
a significant USD202.39m (including redemption premium of
USD60.29m). Fitch believes that JOL's ability to generate
commensurate earnings from the investment in its subsidiaries
(including acquisitions) is critical for improving the company's
financial leverage and maintaining its current ratings. JOL is a
relatively new entrant in the pharmaceutical industry, and its
initiatives in moving up the value chain through organic and
inorganic routes can strengthen its profile as a pharmaceutical
player in the long-run. This will be supported by JOL's policy of
partnering with large pharmaceutical players, instead of
competing with them.

Positive rating drivers include a significant reduction in
financial leverage on a sustained basis, and a significant
improvement in the financial performance of its subsidiaries. Non
improvement in financial leverage in the manner anticipated;
sustained underperformance of subsidiaries and reduction in
profitability would be negative rating triggers.

JOL's business is broadly divided into two segments - Pharma
& Life Science Products & Services and Industrial & Performance
Products. Fitch has taken a consolidated view of JOL's businesses
and financials for the purpose of the rating. In FY09, the
company reported consolidated revenues of INR35.2bn (INR24.9bn in
FY08) and EBITDAR of INR4.8bn (INR4.7bn in FY08), which factored
in INR 2.1bn of forex loss. Total debt as of FYE09 was INR38.8bn
(INR21.1bn at FYE08), including the FCCB debt of INR 9.7bn, while
adjusted net debt to EBITDAR ratio stood at 6.76x in FY09
(compared to 3.33x in FY08).

Contacts: Mansi Tayal, New Delhi, +91 11 4356 7241/
mansi.tayal@fitchratings.com; Abhinav Goel, New Delhi, +91 11
4356 7240/ abhinav.goel@fitchratings.com

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.

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