Fitch affirms Essar Oil

Fitch Ratings said it affirmed Essar Oil Ltd.'s national long-term rating at BBB-(ind), along with its Rs. 53.33 billion term loans, enhanced from Rs. 42 billion, at BBB-(ind) and $100 million external commercial borrowings at BBB-(ind).

The outlook is stable.

The affirmation reflects an expectation of an improvement in the company's credit metrics in the medium-term, Fitch said.

The agency noted that under the phase I capacity expansion, the commissioning of train 1 has been delayed by two quarters to September 2011. Further, there is additional capital expenditure of Rs. 17 billion toward train 1 optimization, which is expected to be commercialized in September 2012, Fitch said.

Consequently, expected deleveraging has been pushed to 2013 from 2012, the agency said.

The ratings also are constrained by volatile crude and oil product prices, which may affect earnings, Fitch added.

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