 "Abhishek Lodha, MD, Lodha Group")
Ratings firm Fitch Ratings has downgraded Mumbai-based Lodha Developers's long-term issuer default rating (LT IDR) to 'B' from 'B+'. Fitch said the outlook is negative. The agency has also downgraded the long-term rating on Lodha's $200 million senior unsecured notes due in 2020 to 'B' from 'B+'.
Fitch said the downgrade reflects Lodha's inability to reduce its leverage, as measured by net debt/adjusted inventory, to a level appropriate for its previous rating. "Its leverage had increased to 80% by 31 December 2015 from 76% at 31 March 2015 (FYE15) and 65% at FYE14, as the company continued to ramp up the pace of construction in its property projects in spite of lower-than-expected presales and cash collections over the last 12-18 months,", it said.
"The negative outlook reflects the heightened liquidity risk that Lodha may face in the short-term together with the risk that leverage will continue to remain high at above 80% - if presales and cash collections continue to underperform our expectations, or if there are significant cash calls from its 40%-owned London joint venture," it said.
Fitch said Lodha pre-sold Rs 6,400 crore worth of properties in FY16, considerably below its expectations of Rs 11,000 crore. "As a result, cash collections were also weaker than expected at Rs 6,200 crore. "However cash collections in FY16 were 15% higher than in FY15 because the construction progress of sections of major projects that were presold in prior years were mostly on track. Fitch expects demand for residential properties in India to remain modest, due to the significant unsold inventory across most domestic regional markets. Therefore we expect Lodha to pre-sell only around Rs 6,000-6,500 crore of property in FY17," it said.
Recently, Ratings firm Moody's Investors Service downgraded the corporate family rating of Lodha Developers to B1 from Ba3.
Moody's also downgraded the senior unsecured debt rating of the US dollar denominated bonds issued by Lodha Developers International Limited and guaranteed by Lodha Developers to B1 from Ba3.
