TEXT-Fitch ups Darjeeling Organic Tea Estates to 'Fitch B(ind)'

(The following statement was released by the rating agency)

June 12 - Fitch Ratings has upgraded India's Darjeeling Organic Tea Estates Pvt. Ltd.'s (DOTEPL) National Long-Term Rating to 'Fitch B(ind)' from 'Fitch D(ind)'. The Outlook is Stable. A list of additional ratings is provided at the end of this commentary.

The upgrade reflects regular servicing of term loans (listed below) over the last six months. There has also been an improvement in DOTEPL's credit metrics based on the provisional numbers for the financial year ended March 2012 (FY12). Financial net leverage (total adjusted net debt/operating EBITDA) and gross interest coverage improved to around 4x-4.5x and 1.5x, respectively, from 6.3x and 1.3x in FY11. However, Fitch expects free cash flows to remain negative in the near term due to increased working capital requirements and ongoing capex.

An improvement in gross interest coverage above 1.7x on a sustained basis would be positive for the ratings while deterioration in gross interest coverage below 1.2x on a sustained basis would be negative.

For FY12 Fitch expects DOTEPL to have seen an improvement in revenue (FY11: INR488.9m) and EBITDA to have improved but a slight weakening in margins (FY11: 31.1%) .

Fitch has also upgraded the ratings of DOTEPL's bank facilities as follows:

- INR296.6m term loans: upgraded to 'Fitch B(ind)' from 'Fitch D(ind)'

- INR370m fund based limits: upgraded to 'Fitch B(ind)' from 'Fitch D(ind)'

- INR5m non-fund based limits: upgraded to 'Fitch A4(ind)' from 'Fitch D(ind)'