Reuters: Financial Services and Real Estate: TEXT-Fitch rates Supreme Infrastructure at 'Fitch BBB(ind)'/stable

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TEXT-Fitch rates Supreme Infrastructure at 'Fitch BBB(ind)'/stable May 9th 2012, 11:06 Wed May 9, 2012 7:06am EDT (The following statement was released by the rating agency) May 09 - Fitch Ratings has assigned India-based Supreme Infrastructure India Ltd (SIIL) a National Long-Term rating of 'Fitch BBB(ind)' with Stable Outlook. A list of additional rating actions is provided at the end of this commentary. The ratings reflect SIIL's strong revenue growth of 70% yoy to INR9.2bn in the financial year ended March 2011 (FY11) and its robust order book of INR41.4bn as of December 2011 (4.4x FY11 revenue). The ratings also factor in the company's established track record of over 30 years in the domestic civil construction industry, especially roads, bridges and buildings. The ratings also reflect the company's comfortable financial leverage (net adjusted debt/EBITDA) of 3.3x and interest coverage of 4.4x in FY11. Fitch, however, expects credit metrics to deteriorate over the medium term and beyond due to SIIL's significant investments in build, operate, and transfer (BOT) projects and any delays in the same. The ratings are also constrained by SIIL's client concentration with its top five customers accounting for 54% of the pending order book, of which 49% forms BOT projects and are accounted by a single customer. SIIL currently has eight projects in its portfolio, which will entail an equity investment of INR7,993.4m over the next four years. The company recently entered into an agreement with 3i India Infrastructure Fund, which will invest a sum of INR3,060m in four BOT projects in June 2012, forming a 49% stake. Fitch notes that though this investment has various debt-like features, it will help meet a large part of the equity funding requirements over the next four years. Positive rating action may result from an improvement in profitability and working capital cycle leading to net adjusted debt/EBITDA falling below 4.5x on a sustained basis. Conversely, pressure on profitability or significant cost or time overruns at BOT projects leading to net adjusted debt/EBITDA exceeding 6.5x on a sustained basis may result in negative rating action. Incorporated in 1983, SIIL is involved in the construction of roads, building, bridges and flyovers, railway platforms, sewerage systems and pipelines. In FY11, on a consolidated basis, SIIL reported EBITDA of INR1.6bn (FY10: INR0.9bn) and a net profit of INR712.6m (INR392m). Debt as of FY11 was INR5,841.2m (FY10: INR3,004m). Provisional results for 9MFY12 indicate total revenue of INR9.9bn and total EBITDA of INR1.7bn. SIIL's bank loan ratings have also been assigned as follows: - INR3,857.3m long-term loans: assigned at ' Fitch BBB(ind)' - INR4,250m cash credit facility: assigned at 'Fitch BBB(ind)'/'Fitch A3(ind)' - INR5,200m non-fund based limits: assigned at 'Fitch BBB(ind)' Link this Share this Digg this Email Reprints

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