Fitch Ratings has lowered Indias KS Oils Limiteds (KS Oils) National Long-term Rating to BBB+(ind) from A-(ind) (A minus(ind)) and revised the Outlook to Stable from Negative.
Fitch has lowered the rating of KS Oils Rs 2750mn long term loans to BBB+(ind) from A-(ind) (A minus(ind)) and affirmed the Short-term rating assigned to its Rs 4400mn short term bank facility at F2+(ind).
The action follows KS Oils recent announcement of an Rs1250mn acquisition of an edible oil refinery from Kolkata-based Ambo Agro Products and its revised capex plan envisaging a higher outlay. The company plans to invest Rs6850m in FY09 towards the acquisition, capacity expansion, Wind Power (WP) projects and the development of palm plantations. The downgrade reflects increased risks on account of the companys entry into new areas such as wind energy, and the consequent execution risk.
The company invested Rs1480mn in FY08 for WP projects and plans to invest another Rs2270mn in FY09 and INR150m in FY10. KS Oils faces execution risks during construction of wind energy, however over the long-term, these initiatives could increase the stability of its earnings on the back of well structured power purchase agreements for its wind energy project.
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