Fitch Ratings has affirmed the long-term issuer default ratings on India-based paper maker Ballarpur Industries (BILT) and its subsidiary Bilt Paper B.V. at 'B+'. The outlook is stable.

BILT has been taking steps to reduce its high net debt levels. The company's net debt at the end of the financial year to Jun. 30, 2014 (FYE14) was Rs 64 billion, including a 50% equity credit for the perpetual debt of Rs 12.9 billion issued at its subsidiary Bilt Paper.

The company raised USD 100 million from an equity issuance to International Finance Corporation (IFC) at its subsidiary Bilt Paper in October 2014, which BILT used to reduce debt. Fitch expects BILT's net debt to reduce to below Rs 58 billion by FYE15. BILT is also in the process of raising additional equity by way of an IPO of Bilt Paper, which if successful, will lead to a further reduction in its debt levels.

Financial Profile to Improve: Fitch expects BILT's financial profile to benefit from the reduction in its indebtedness as well as improvements to its cost structure and benefits of vertical integration. The agency expects BILT's net leverage to reduce to around 5.5x by FYE15 and below 5.5x by FYE16 after incorporating the equity issuance to IFC but before any additional equity it may raise from the IPO of Bilt Paper.

BILT's liquidity has improved from FYE13; the company had cash balances of Rs 2.57 billion as of FYE14, up from Rs 740.2 million at FYE13. Further, IFC has extended a long-term loan of USD 150 million to BILT, which it plans to use to refinance most of the current debt at its Malaysian subsidiary, Sabah Forest Industries Sdn. Bhd. (SFI). The new debt comes with easier covenants and longer maturity, adding to its overall liquidity.

Shares of the company declined Rs 0.2, or 1.24%, to settle at Rs 15.95. The total volume of shares traded was 122,490 at the BSE (Tuesday).