ICRA has upgraded the long term rating to 'B' from 'BBB-' to Rs 3.88 billion term loans, Rs 1.91 billion cash credit facilities and Rs 406.9 million long term unallocated limits of Rajshree Sugars and Chemicals (RSCL). ICRA has also upgraded the short term rating to 'A4' from 'A3' to Rs 300 million short term unallocated limits of RSCL.

The ratings revision factors in the weakening of the financial profile of the company owing to the significant decline in the sugar realizations during FY14 vis-a-vis the sugarcane costs; operating profitability declined to 5.59% during 9M FY14 from 13.60% during 9M FY13 and consequently the company reported losses at the net level during 9M FY14. These factors necessitated a CDR (corporate debt restructuring) in Dec, 2013 which was implemented in March, 2014.

The ratings are also constrained by the exposure of the company's business to agro-climatic risks and regulatory intensity of the industry, high gearing and weak coverage indicators on account of decline in profitability and high interest expenses.

ICRA has taken a consolidated view on the RSCL, with its subsidiary Trident Sugars, as both are in the same line of business and RSCL has guaranteed credit lines of Trident Sugars. 

However, the ratings are supported by the presence in the industry over a long period, experienced management, company's large sugarcane crushing capacity, high yields and longer crushing period in its command area, and proximity to ports. Commissioning of a distillery in unit III of the company to process molasses from both unit II and unit III of the company would enhance its forward integration profile, and provide cushion to profitability to an extent in case of sugar downturn.