Rating agency ICRA has suspended its creditworthiness rating on Ansal Properties and Infrastructure Ltd (APIL) after the real estate major failed to provide sufficient information to assess appropriate rating. The decision comes in the backdrop of increased vigilance by rating agencies over the performance of real estate companies.
“Unlike other sectors, audited balance sheet is only a starting point to assess the creditworthiness of a real estate player. They have to provide details of their ongoing projects, the number of bookings happening, the construction status and specifics of agreements they have with land owners before ratings can be reviewed”, Vikas Aggarwal, senior vice-president, ICRA, said.
Ansal officials were unavailable for comments.
“The suspension of the MB+ rating for the fixed deposit programme follows ICRA’s inability to carry out a rating surveillance, with APIL not providing the relevant information as sought by ICRA. According to its suspension policy, ICRA may suspend any rating outstanding if in its opinion there is insufficient information to assess such rating during surveillance. ICRA will withdraw the rating in case the same remains under suspension for a period of three years”, stated an ICRA press release.
ICRA also downgraded the rating assigned to the Fixed Deposit (FD) programme of APIL from MA- to MB+ indicating inadequate credit quality.
The rating revision takes into account the weakening of APIL’s credit profile due to deterioration in the operating environment, given the slowdown in demand and falling property prices. APIL’s net sales have declined by 21 per cent to Rs 491 crore for the nine month-period ended December 2009 as compared to Rs 620 crore in the corresponding period last year.
The profit after tax declined by 65 per cent to Rs 47 crore over the same period.
This coupled with higher than anticipated debt levels and large repayment obligations has weakened the capital structure and debt coverage indicators. Going forward, the company’s ability to maintain its sales momentum in the current scenario of demand slowdown and to meet its repayment obligations on time would be the key sensitive factors, ICRA said.
