"The downgrade reflects heightened liquidity risks at India-based parent company Amtek Auto. We see a risk that Amtek Auto may not have sufficient liquidity to meet its interest or debt obligations, which could lead to a default at Amtek Auto, or a debt restructuring," S&P Rating Services said in a statement.
Automobiles component maker Amtek Auto, which is grappling with financial stress, has cited the current market scenario "which caused decline in the sales and profit margins of the company", for the present situation.
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Singapore-based Amtek Global Technologies Pte Ltd's long-term corporate credit ratings has been cut to 'CCC+' from 'B+', indicating increased credit risks.
Besides, S&P has lowered the issue ratings on Amtek Global's 235 million euro senior secured term loan and 30 million euro revolving credit facility (RCF).
"The heightened liquidity risks follow spending on acquisitions by Amtek Auto, coupled with high short-term debt and low cash balances as of March 31, 2015, as well as an increase in losses during the three months to June 30, 2015," the rating agency noted.
Besides, the rating agency has placed all ratings on "credit watch with developing implications".
"We could raise the ratings by one notch if we consider that Amtek Global is insulated from Amtek Auto, under our criteria. We could also lower the ratings if Amtek Auto misses any interest or principal payments, or enters into a distressed debt exchange or restructuring," it said.
Even as Amtek Auto is looking to raise funds, concerns have been on the rise about its financial condition which has also created ripples in the mutual funds industry.
Amtek Auto has also come under the Sebi scanner for alleged share price manipulation at its subsidiary Castex Technologies.
Over a dozen banks have over Rs 26,000 crore exposure, mostly unsecured, to the Amtek Group, which had about Rs 20,000 crore revenue last fiscal year. It needs an immediate liquidity of Rs 800 crore to redeem foreign bonds. But banks have ordered a forensic audit of the books of the company before deciding on their future course of action.