Bajaj Electricals extends fall on credit rating downgrade, weak Q2 results

In the past two weeks, the stock has underperformed the market by falling 20 per cent on weak September quarter (Q2FY20) earnings.

Shares of Bajaj Electricals continued to remain under pressure, hitting an over two-year low of Rs 309, down 3 per cent on the BSE on Tuesday after the rating agency ICRA downgraded the company’s credit rating due to poor earnings.

The stock of household appliances hit its lowest level since August 2017. In the past two weeks, it has underperformed the market by falling 20 per cent on weak September quarter (Q2FY20) earnings. In comparison, the S&P BSE Sensex has gained nearly a per cent during the same period.

“The rating agency has inter alia considered significant decline in profitability of the engineering, procurement and construction (EPC) business of the Company particularly pertaining to the orders in rural electrification in H1FY2020 and the subsequent weakening in the Company’s debt coverage metrics,” Bajaj Electricals said in a regulatory filing on Friday.

In the recently-concluded quarter, Bajaj Electricals reported a net loss of Rs 32.55 crore against a net profit of Rs 29.83 crore logged in the year-ago quarter. Operational revenue, too, decreased 31.5 per cent year-on-year (YoY) to Rs 1,096 crore, due to poor performance by EPC segment.

The management said consumer products segment registered a moderate growth of 9 per cent YoY in the top line on account of an overall slowdown in the economy, while the EPC segment registered a planned de-growth due to reduction in fresh bidding.

On rating downgrade, Bajaj Electricals said that the company has taken a strategic call by adopting a more risk-calibrated approach for the EPC segment and the thrust is on completion of running projects; bidding only for those projects which have better margins, good payment terms and do not require high working capital.

The Company expects to continue to generate positive cash flow from operations for second half (H2) of FY20 and hence is on a clear path to continue reduction in debt. The Company enjoys full support from the Promoter Group and hence will be able to not only meet all its debt obligations but also able to cover any gaps/mismatches in the cashflow, it added.