Moody's downgrades Core Education to B2; outlook negative

Share orice volatility, sale of promoter pledged shares prompted the move

Rating agency Moody's has slashed its rating for Core Education & Technologies Ltd from “B1” to “B2”. The downgrade reflects concerns over company’s ability to access capital consistently due to volatility in share price and the sale of the promoter's pledged shares.

The rating outlook is negative, Moody’s said in a statement.

The price of Core Education share has declined by 75% since late February, Moody’s said. CORE Education stock, however, today closed higher by 2.3% at Rs 86.95 on Bombay Stock Exchange today.

Volatility in the company's share price was precipitated by margin calls on some investors' accounts which then required the sale of shares.

The rating agency said, the decline in CORE's share price caused the subsequent sale of promoter's shares which was held as collateral for some of the promoter entities bank facilities.

"While CORE's fundamental business remains sound, we believe that recent events have not been conducive to improving its tight liquidity position arising from its high reliance on debt to support growth, tight covenant levels and restricted financial flexibility, Moody’s said.

Moody's expects CORE to continue generating negative free cash flow due to high working capital requirements and a substantial annual capital expenditure of around Rs 500 crore. It therefore needs to have stable access to domestic bank funding to support its operations, it added.