Crisil has downgraded its ratings on the bank facilities of Lanco Infratech Ltd to Crisil D, because the company was unable to repay a debt of Rs 250 crore by the due date of October 23.
Lanco Infratech has total repayment obligations of Rs 800 crore that it must pay in October and November 2012 and January 2013.
The ratings agency believes that Lanco Infratech’s liquidity will remain under pressure over the medium term because in addition to these lumpy repayments, it needs between Rs 500 crore and Rs 700 crore for meeting its equity investments in three power projects — Vidarbha (Maharashtra), Babandh (Odisha) and Amarkantak (Madhya Pradesh).
Crisil has said that it has learnt from the management of Lanco that the company intend to ease this liquidity pressure by selling stakes in its road and wind power and hydroelectric power projects.
Apart from pressures on its liquidity, Lanco Infratech’s financial risk profile will remain under stress over the medium term, as the company continues to have large exposure to under-implementation projects in its special purpose vehicles, and because of underperformance of Griffin Coal Mining Pty Ltd.
As on March 31, 2012, the Lanco Group’s operational power plants had a combined capacity of 4,410 megawatts (MW). The group has power projects under implementation with a combined capacity of 4,986 MW.
For 2011-12, Lanco Infratech reported a net profit (excluding gain/loss on account of foreign exchange fluctuations) of Rs 265 crore on a total income of Rs 8,600 crore; for 2010-11, the group reported a net profit of Rs 215 crore on a total income of Rs 5,800 crore.
On the BSE, the Lanco Infrastructure share, of face value of Re 1, is currently trading at Rs 13.05.