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Press Releases
23-Apr-14
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Ratings of [ICRA]AA- and [ICRA]A1+ reaffirmed for bank lines of Apeejay Tea Limited (erstwhile, Apeejay Surrendra Corporate Services Limited)
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ICRA has reaffirmed the long term rating assigned to the Rs 200 crore fund based and non-fund based facilities of Apeejay Tea Limited (ATL) (erstwhile, Apeejay Surrendra Corporate Services Limited)† at [ICRA]AA- (pronounced ICRA double A minus). The outlook on the long term rating is Stable. The above facilities are interchangeable with the short-term, for which ICRA has reaffirmed the rating of [ICRA]A1+ (pronounced ICRA A one plus). The reaffirmation of the ratings take into account the improvement in tea production and realizations registered by the company during first nine months of FY14 (9mFY14), leading to an improvement in the profits and the cashflows of the company, which is likely to be sustained given the positive outlook for the Indian tea industry. The ratings also reflect the comfortable financial risk profile characterised by a conservative capital structure and healthy coverage indicators, and the financial flexibility that the company derives from being a part of the Apeejay Surrendra group with diversified business interests. The ratings are also supported by the favourable age profile of the bushes and operational improvements leading to higher yields, which benefits the company, given the fixed cost nature of bulk tea operations. The capex incurred by the company during the last two years has further strengthened its operating profile by improving the quality of its produce. The ratings, however, also take into account the risks of tea being a cyclical agricultural commodity dependent on favourable agro-climatic conditions, which is further accentuated given the fixed cost nature of operations and the significant increase in input costs. In addition, Indian tea is essentially a price taker in the international market and hence global supply demand dynamics would continue to have a bearing on the domestic price levels to an extent. Nonetheless, ICRA expects the company's cashflows to remain comfortable relative to its debt service obligation.
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