Sucheta Dalal :ICRA downgrades Rathi Steel’s debt rating
Sucheta Dalal

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ICRA downgrades Rathi Steel’s debt rating  

November 19, 2009

 

Ratings agency ICRA has downgraded its rating of the Rs374 crore long-term debt of Rathi Steel and Power Limited (RSPL) from LBBB to LB+. It has also revised its rating of the company’s Rs45.5 crore short-term debt from A3+ to A4.
 
ICRA said the downgrade was due to deterioration in the liquidity profile of RSPL, which was evident from delays in meeting its debt obligations. The agency said the delays have arisen because of substantial debt-funded capex undertaken by the company for its backward-integration plant in Orissa coupled with moderate accruals from the plant in comparison to the debt-servicing requirement.
 
The ratings were further constrained by the weak financial performance of the company over the last few quarters, lack of captive iron ore (which is critical to the profitability of operations) and the competitive nature of the industry, which are reflected in the relatively low operating margins and moderate debt protection indicators for RSPL, ICRA said.
 
Hwoever, in the stock market, Rathi Steel has been shooting up. Its share price has increased 18% over the past two weeks—from Rs13.87 on 4th November to Rs16.50 on 18th November. Going forward, timely servicing of debt obligations by the company and improvement in its financial performance will remain the key rating-sensitivity factors, ICRA said.
Ravi Samalad [email protected]

-- Sucheta Dalal



 



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