Based on the review of the latest developments,  the long term rating of  the Company has been  revised from [ICRA]BBB+  to [ICRA]BBB and the short term rating has been revised  from [ICRA]A2 to [ICRA]A3+.  

The rating rationale for such revision by ICRA Limited are summarized hereinbelow:

The said rationale takes into consideration lower-than-expected tea production and increased labour cost which would likely affect the operative results for the Financial Year 2018-19. The rationale observes that although the average realization and production are likely to be higher during the current year over that of the previous year, however, increased cost of tea production on account of increased wage rates is expected to adversely impact profitability. The ratings continue to favourably consider the Company’s  premium quality tea, realizations of which are higher than the industry averages. Besides, relatively high yield of the Company’s estates mitigates the risks associated  with  the  fixed-cost  intensive  nature of  the tea plantation business to some extent. The ratings, however, also factor in the risks associated with tea for being an agricultural commodity, which depends on agro-climatic conditions and the inherent cyclicality of the fixed-cost intensive tea industry that leads to variability in profitability and cash flows of bulk tea producers like WTL. As Indian tea is essentially a price taker in the international market, low global prices affected domestic realizations to some extent as well; the actual production level and tea realization would remain the key rating sensitivities given the increased cost of tea production.

 

<< previous

next >>