Fitch Ratings has affirmed Essar Projects Ltd’s Long-Term and Short-Term Foreign Currency Issuer Default Ratings at ‘B’. Outlook on the long-term rating has been revised to negative from stable.

The agency has also withdrawn the ‘B’ rating on Essar Projects’ $100-million working capital loans as there is no amount outstanding against the instrument. Essar Projects is the holding company of the various construction companies of the Essar Group.

The negative outlook reflects Essar Global Ltd's high financial leverage in FY’12 and its likely slower-than-expected deleveraging.

Fitch notes that as a large part of Essar Global capex — namely the 10 mtpa oil refinery expansion and the 5 mtpa steel expansion — is complete, the group level EBITDA will increase in FY’13 and consequently lead to deleveraging.

However, given the adverse industry scenario in some of the businesses, deleveraging could be lesser than expectations.

The rating affirmation reflects Essar Projects’ robust order book of $6.3 billion and its comfortable credit metrics. In FY’12, revenues grew 23 per cent year-on-year to $ 2.1 billion and EBITDA margin was 7.9 per cent.

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