Capacite Infraprojects slumped 16.58% to Rs 165.25 after India Ratings and Research (Ind-Ra) downgraded its long-term issuer rating on the company to 'IND D' from 'IND A' with a negative outlook.
Ind-Ra said the downgrade reflects Capacite Infraprojects (CIL)'s challenges with liquidity, which led to default in the servicing of its debt obligations. The liquidity situation worsened during the time of the pandemic as the execution profile of the company deteriorated significantly, resulting in cash flow mismatches. While the company availed of the Reserve Bank of India (RBI)-prescribed moratorium in the 1HFY21, the liquidity challenges continued in the 2HFY21. Although the company's execution profile improved slightly in 2HFY21, it was not able to generate sufficient cash flows due to the severity of the pandemic-led lockdown in Mumbai Metropolitan Region (accounted for 91.8% of the unexecuted order book including a MHADA project at FYE21; 91.9% without MHADA project).While the agency was informed that the company had applied for enhancements from all the lenders under Emergency Credit Line Guarantee Scheme(ECLGS) 2.0 scheme, these loans were disbursed with a time lag, majorly on account of availing internal approvals from various lenders; this resulted in the company delaying on its repayment obligations.These delays were also commented on by the auditor in the independent audit report for FY21 where the extent of delays (61-90days) were regularised post the disbursement of the ECLGS 2.0 loans.
Furthermore, the agency was informed that CIL had average monthly liquidity (cash balances in various current accounts along with unencumbered fixed deposits) to the tune of Rs 59.42 crore against an average monthly repayment obligation (principal+ interest component of the equipment loans) of Rs 5.21 crore over October 2020 -July 2021.
The agency had also considered the guidance made by RBI that dispensation in the default recognition is provided only during the period of moratorium and is not available during the sanction and final disbursement of ECLGS scheme. Furthermore, the RBI had also opined that there should not be delay in honouring the payment with any lender anticipating disbursal of additional funds.
Separately, Capacite Infraprojects clarified on the bourses that it strongly protested the ratings action and have urged Ind-Ra to reconsider their stand.
Th company said that all loan/debt facilities of all financial institutions are currently standard and regular. All the consortium banks/ term lenders have confirmed that the account is standard and regular with them. The EPC firm admitted there were some delays in the past which were more technical in nature and linked with pandemic. The lenders of the company have sent emails to the rating agency confirming the same and have also stated that the account is standard and regular as on date and they have not construed the same as default.
The collections have been robust which provide sufficient visibility in terms of liquidity. Furthermore, the company said all installments due up to 31 July 2021 have been paid in full and there is no situation of defaults of our obligations. The company's working capital cycle has registered continuous improvement from Q3 FY21 post the relaxation of Covid 19 related restrictions and bound to improve further in coming quarters. Meanwhile, the promoters of the company have infused Rs 47 crore as unsecured long term loans in Q1 FY22
The company said it has apprised the lenders who are very supportive and have indicated their continuing support towards its banking relationship. The company has initiated discussion with other rating agencies to provide their independent ratings on the company's debt facilities. Further, the company has operational order book in excess of Rs 8,800 crore as on 30 June 2021 from marquee clients.
The company reported a consolidated net profit of Rs 4.25 crore in Q1 FY22 as against net loss of Rs 43.06 crore in Q1 FY21. Net sales stood sharply higher at Rs 279.96 crore in Q1 FY22 as against Rs 23.7 crore in Q1 FY21.
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