TEXT-Fitch cuts Bhaskar Shrachi to 'Fitch B(ind)';outlook stable

(The following statement was released by the rating agency)

June 18 - Fitch Ratings has downgraded India-based Bhaskar Shrachi Alloys Limited's (BSAL) National Long-Term rating to 'Fitch B(ind)' from 'Fitch B+(ind)'. The Outlook is Stable. A list of additional rating actions is provided at the end of this commentary.

The downgrade reflects expected deterioration in BSAL's performance for the financial year ended March 2012. Provisional FY12 results show an expected EBITDA loss of INR4.7m, compared with FY11's INR84.5m profit, due to an inability to pass on increased raw material and power costs, and volatile end-product prices. This resulted in stressed liquidity which the company has been able to manage by reducing its inventory holding period to 83 days in FY12 from 187 days in FY11.

The ratings also reflect a 65.5% yoy growth in revenue in FY12 to INR1,741.6m due to higher production volumes and sales across all products.

Positive rating guidelines would be an improvement in EBITDA margin resulting in interest cover above 1.5x (FY11: 1.58x ) on a sustained basis. Conversely, negative rating guidelines would be low EBIDTA margins leading to interest cover below 1.2x on a sustained basis.

Incorporated in 1995, BSAL is a manufacturer of ferro alloys (13.5 Mega Volt Amperes), SGCI inserts (6,000 metric tons) and billets (65,000 metric tons) in Durgapur.

Fitch has also taken following action on BSAL's bank loan ratings as follows:

- INR14.4m long-term loan (reduced from INR25.7m): downgraded to National Long-Term 'Fitch B(ind)' from 'Fitch B+(ind)'

- INR265m fund-based limit: downgraded to National Long-Term 'Fitch B(ind)' from 'Fitch B+(ind)'; affirmed at National Short-Term 'Fitch A4(ind)'

- INR150m non-fund-based limit affirmed at National Short-Term 'Fitch A4(ind)'