It placed it on Rating Watch Negative (RWN).
The downgrade reflects HDOL’s continued weak financial performance during six month of FY13 (ended 31 December 2012). Its standalone revenue declined 53% (year-on year) to Rs 160 crore.
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The cause for the fall in revenue was the company’s slower execution of projects due to lack of funding and minimal order inflow during the period, rating agency said.
Its parent company IVRCL Infrastructures and Projects Limited holds 55% of stock, according to company website.
The decline in revenue and cost overrun estimated at Rs 48 crore severely impacted operating margins. It was expecting to receive around Rs 120 crore of its receivables end of December.
These payments were blocked in some of its projects executed in the minerals and environmental divisions. However, no significant collection happened against this amount during the period which has further stretched its liquidity.
The agency has not received any representation from the management team of HDOL confirming the timely debt servicing by the company. The company has to pay the first instalment of $1.25 million on its $20 million external commercial borrowing (ECB) loan on 17 April 2013. It may face challenges in repayment given its current strained liquidity situation, India Ratings said.