ICRA has downgraded ratings of Shapoorji Pallonji and Company Private Limited (SPCL) and assigned negative outlook. The ratings downgrade and negative outlook takes into account the slower-than-anticipated progress achieved by the company in terms of its deleveraging plans through equity infusion and asset monetisation.

“ICRA has noted that the promoters have infused a total of Rs 2,270 crore in SPCPL during the first half of FY2020, including Rs 1,900 from the proceeds of the Sterling & Wilson Solar Limited (SWSL) Initial Public Offering (IPO), however, contrary to ICRA expectations, the net debt levels have not come down because the same has been deployed to meet the funding requirements of several group companies, especially in the real estate business, both for meeting their debt obligations as well as construction finance to complete the ongoing projects,” ICRA said in a statement.

ICRA has also taken note of the recent developments in SWSL, wherein its promoters – SPCPL and Khurshed Yazdi Daruvala, requested for revised repayment schedule of the inter-corporate deposits (ICDs) due from their jointly held entities to SWSL. As part of the commitments made by the promoters during the Initial Public Offering (IPO) of SWSL, a portion of the net offer proceeds from the IPO were to be utilized for repayment of these ICDs. While SPCPL is not a borrower for these ICDs, their impending settlement has resulted in an increase in SP group’s overall funding requirements.

The long-term ratings have been removed from watch with developing implications and ‘negative’ outlook has been assigned. ICRA believes the financial risk profile of SPCPL will remain under pressure due to elevated debt levels, high refinancing risk and slower than anticipated progress in asset monetisation.

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