India Ratings (formerly Fitch) has suspended the ratings of Shriram EPC “due to lack of adequate information’’.
Shriram EPC, a part of the Chennai-based Shriram group, has stopped participating in the rating exercise, a press release from India Ratings said.
The rating agency will no longer provide ratings or analytical coverage of SEPC. The ratings will remain in the suspended category for a period of six months and be withdrawn at the end of that period.
Information considered critical to review the ratings includes Shriram EPC’s current state of dues and divestment plans relating to Sree Jayajyothi Cements Ltd (SJCL), details of SEPC’s and SJCL’s debt and repayment terms, SEPC’s plans for recovery of debtors due for more than six months and details of its large and significant related party transactions, India Ratings said.
The rating agency believes that any improvement in Shriram EPC’s liquidity is unlikely in the near term given the sharp deterioration in its overall liquidity profile, muted revenue growth and considerable difficulty in collecting receivables. “This reflects a credit profile which is significantly weaker than indicated by the current rating,” the release said.
Shriram EPC is a medium-sized engineering, procurement and construction company, operating in renewable energy, process and metallurgy, and municipal services segments.
Deterioration in SEPC’s liquidity profile started with its inability to recover dues from Sree Jayajyothi Cements since 2010. Unable to recover dues, the company converted part of its dues of Rs 606 crore into equity and took controlling ownership of SJCL.
Adjusted leverage reported above does not include Sree Jayajyothi Cements’ debt. SEPC’s cash flow from operations fell to negative Rs 628 crore in 2011-12 from negative Rs 304 crore in 2010-11.
Also, receivable days went up significantly during 2011-12 as did the loans and advances to related parties, while revenues remained flat at Rs 1,382 crore in 2011-12 from Rs 1,302 crore in 2010-11.