ICRA reaffirms A1 rating to Rs 10 cr STD Prog of LHSF

New Delhi, June 5 (UNI) Credit rating agency ICRA has reaffirmed the A1 rating to the Rs 10 crore Commercial Paper/Short-Term Debt Programme of LH Sugar Factories Ltd (LHSF) indicating highest-credit-quality rating assigned by ICRA for short term.

The rating action factors in the improving profitability and cash accruals of the company following an upturn in sugar prices, positive outlook on the sector in the medium term and availability of adequate bank limits to fund the working capital intensive sugar operations, resulting in satisfactory liquidity position.

While reaffirming the rating, the agency has taken into account the substantial capacity addition currently underway in Uttar Pradesh which could have an impact on the stock position and price realisations, particularly from Sugar Year (SY) 2007-08 onwards.

ICRA expects that the ongoing modernisation cum cogeneration project at Pilibhit, Uttar Pradesh, while affecting its capital structure in the short run, would benefit LHSF in the medium to long-term by improving operating efficiencies and diversifying the revenue streams.

The rating is however constrained by the relatively small size of operations, regulatory risks regarding offtake and pricing of by-products such as molasses and power, agroclimatic risks inherent in the business, geographical concentration risks arising out of single mill operations and cyclical trends in the sugar business.

ICRA has also drawn comfort from the long experience of the promoters in this industry while reaffirming the A1 rating.

UNI MP PV KN1933