Financial Daily from THE HINDU group of publications
Friday, Dec 26, 2003
Financial Daily from THE HINDU group of publications Friday, Dec 26, 2003 |
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Corporate
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Corporate Bonds ICRA downgrades Escorts' debenture programme Our Bureau
New Delhi , Dec. 25 ICRA has downgraded the rating assigned to the Rs 113-crore non-convertible debenture programme of Escorts Ltd from `LBBB' to `LBB'. The revised rating, down one notch, indicates inadequate safety. ICRA has also downgraded the rating assigned to Escorts' Rs 40-crore commercial paper (CP) programme from `A1' to `A3'. The CP programme, according to an ICRA statement here, is supported by a letter of comfort from Escorts Heart Institute and Research Centre Ltd (EHIRC), a single speciality tertiary care hospital specialising in cardio-vascular surgery. ICRA has stated that although over a period of time EHIRC has deployed its surpluses in setting up its four subsidiaries and three heart command centres, it continues to remain debt-free and generates healthy accruals from operations. The downgrade of the CP programme of the company factors in the uncertainties regarding the timeliness of the support, from EHIRC, to the rated commercial paper. The rating downgrades have taken into account the increasing financial risk profile of Escorts Ltd arising out of delays in divestment of its telecom businesses and continuing losses from operations. The company has substantial debt repayments falling due, over the short to medium-term. The strained liquidity position of the company has resulted in Escorts going for rescheduling of its maturing liabilities. The continuing uncertainty with respect to the inflows expected from the proposed divestment of its telecom businesses have further exerted pressure on the cash flows, rendering the company more vulnerable, ICRA has said. On the brighter side, however, ICRA has stated that the financial risk profile of the company would show improvement once the telecom businesses get divested. Likely improvement in the tractor business would further help in easing the pressures on the cash flows. Escorts' tractor business is expected to show some improvement in the current year with increasing volumes aided by good monsoons, correction in channel inventory and impetus of banks on retail financing.
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