Fitch ratings affirms Hindustan Coca-Cola Beverages' national long-term rating at AAA; outlook stable

NEW YORK , March 14, 2012 (press release) – Fitch Ratings has affirmed India-based Hindustan Coca-Cola Beverages Private Limited's (HCCBPL) National Long-Term rating at 'Fitch AAA(ind)'. The Outlook is Stable. The agency has also affirmed HCCBPL's INR17,294m fund- and non-fund-based bank loans (reduced from INR18,644m) at 'Fitch AAA(ind)'/'Fitch A1+(ind)'.

The ratings continue to reflect HCCBPL's strategic and operational linkages with its ultimate parent - The Coca-Cola Company (TCCC, rated 'A+'/Stable/ 'F1'), as well as its coverage under TCCC's international credit support policy; although there are no legal ties (guarantees, cross default provisions) between the two entities.

Under its credit support policy, TCCC has conveyed to its bankers that all entities owned 50% or more by it, directly or indirectly, should be considered equivalent to its credit risk; Fitch notes that this is a verbal policy, rather than one covered by legal documentation.

Fitch notes that TCCC has been focusing on emerging markets for growth opportunities and India is one of the top five focus markets under its internal 2020 plan. The parent has consistently infused equity into HCCBPL to support its expansion plans. The agency also notes that HCCBPL's operations will continue to benefit from the stable demand in the domestic beverage business and the duopoly nature of the carbonated drinks industry.

Negative rating guidelines constitute a significant downgrade in TCCC's ratings or a weakening of HCCBPL's linkage with the parent, including dilution of equity, reduction of control or exclusion from TCCC's credit support policy.

HCCBPL is indirectly fully owned by TCCC, and has 24 bottling plants across India. The product profile of the company includes both carbonated and non-carbonated soft drinks.

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