TEXT-Fitch afrms Amir Chand Jagdish Kumar at 'Fitch BBB-(ind)'/stbl

Mon Apr 16, 2012 8:00am EDT

(The following statement was released by the rating agency)

Apr 16 - Fitch Ratings has affirmed India-based Amir Chand Jagdish Kumar (Exports) Limited's (ACJKL) National Long-Term rating at 'Fitch BBB-(ind)' with a Stable Outlook. A list of additional rating actions is provided at the end of this commentary.

The ratings continue to reflect ACJKL's established track record in basmati rice export, the strong experience of its founders in rice trading and processing, and the company's consistent revenue growth at a CAGR of 12.3% over FY08 to INR6.2bn in FY11 (financial year ending March).

The ratings are, however, constrained by ACJKL's geographical concentration of exports towards the Middle East, high working capital requirements, and the commoditised nature of its business, although these factors are common to the industry. However, Fitch notes that the company's brands are well established in the market, allowing it to command premium prices.

The ratings are further constrained by the vulnerability of the industry to fluctuating raw material prices, fluctuations of monsoons and regulations on rice exports. However, despite these factors, ACJKL's EBITDA margins have remained stable at around 7% over FY07-FY11.

Negative rating action may result from a significant decline in revenue and profitability and/or debt-led capex and/or an increase in working capital requirements with gross interest coverage (EBITDA/gross interest expense) below 1.3x on a sustained basis. Conversely, a significant improvement in ACJKL's profitability with gross interest coverage beyond 1.8x on a sustained basis may result in positive rating action.

Incorporated in August 2003, ACJKL is involved in the trading of basmati and non-basmati rice varieties. The company's flagship brand is Aeroplane, while some other brands include World Cup, Alibaba, Palm Tree, Sophia, and Jet. Its milling facilities are located at Alipur in Delhi, Safidon in Haryana and Chhabal in Amritsar. In FY11, ACJKL reported a net profit of INR96m (FY10: INR98m), net financial leverage (net debt/EBITDA) of 5.4x (4.9x), and interest coverage (EBITDA/net interest expense) of 1.65x (1.88x). Revenue was INR6bn in FY10.

Fitch has also affirmed AJCKL's bank loan ratings as follows:

INR340m term loans (reduced from INR451.2m): affirmed at 'Fitch BBB-(ind)'

INR1810m fund based limits: affirmed at 'Fitch BBB-(ind)'/'Fitch A3(ind)'

INR40m non-fund based limits: affirmed at 'Fitch BBB-(ind)'/'Fitch A3(ind)'

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