Fitch: HEG outlook negative

Fitch Ratings said it revised the outlook on HEG Ltd. to negative from stable while affirming its national long-term rating at AA-(ind).

Fitch also assigned an AA-(ind) rating to HEG's proposed Rs. 1 billion non-convertible debenture program.

The revision in outlook reflects deterioration in HEG's credit profile due to more-than-expected debt coupled with a decline in profitability, the agency said.

HEG's total adjusted net debt to EBITDA deteriorated to 7.62 times as of Sept. 30 from 4.04x at the end of March and 2.2x in 2010, Fitch said.

The ratings are underpinned by HEG's position as one of the leading manufacturers of graphite electrodes in India, its diversified customer base and its 100% self-sufficiency in power by way of captive power plants, Fitch said.

The ratings are constrained by the high working capital requirements of the business and HEG's cash conversion cycle has remained above 300 days for the last three years ended fiscal 2011, Fitch noted.

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