MUMBAI, March 20: The Credit Rating Information Services of India Ltd (Crisil) has downgraded the Rs 17-crore non-convertible debenture (NCD) plan of Welspun India Ltd (WIL) from A to triple-B. The revised rating indicates moderate safety.The rating reflects the increased financial risk due to predominantly debt funding of the terry towel and cotton spinning projects. The company's plans to part-finance the projects out of equity capital did not materialise due to the continued sluggishness in the equity markets.
The resultant increase in the proportion of debt funding for the projects has adversely affected the capital structure and debt servicing ability of the company. WIL is a 100 per cent export-oriented unit (EOU) with interests in terry towel and cotton yarn exports.
Crisil has also downgraded the debt instruments of Raunaq Finance Ltd and Schlafhorst Engineering (India) Ltd to the default category. Raunaq Finance's fixed-deposit programme has been downgraded to FD from FB+, while Schlafhorst'sRs 4-crore NCD plan has been downgraded to D from BB. The rating agency has also downgraded Schlafhorst's Rs 6.47-crore cumulative convertible preference share programme.
The revised rating of Raunaq Finance reflects the company's weakening asset quality and deterioration in the overall risk profile of the company resulting in significant losses in the year 1996-97 and the first half of 1997-98. Crisil has said that the overall liquidity position of the company remains under strain.
The downgrading of Schlafhorst factors in the deterioration of business and financial position of the company which is reflected in continuous cash losses for the past five years resulting in the almost total erosion of the company's networth. During 1997, Schlafhorst reported an operating income of Rs 35.1 crore with a net loss of Rs 3.12 crore.
Crisil has also downgraded the Rs 4.5-crore NCD issue of Shreyans Industries Ltd (SIL) to C from BB+, indicating substantial risk on the instrument. The revised rating reflects adeterioration in SIL's business risk profile on account of a decline in realisations on writing and printing paper and continued large exposure to its loss-making affiliate.
The rating also factors in the adverse change in its financial risk profile on account of funds locked up in the on-going project, reliance on short-term inter-corporate borrowings, deterioration in the capital structure and pressure on profitability and cash flow generation which would limit the company's ability to make timely repayments on its debt obligations.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
