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The country’s largest steel wire rope maker Usha Martin Ltd (UML), which has been reeling under liquidity pressure due to cash losses in the past two fiscals, faced a rating downgrade.
The company’s plan to raise capital through issue of convertible warrants came a cropper due to conflict between promoters. A subsequent plan to sell the profitable wire rope business to reduce debt is yet to materialise.
As UML failed to improve the EBIDTA margin in the first-half of this fiscal, India Ratings and Research downgraded Usha Martin’s long-term issuer rating to ‘IND BB+’ and placed it on Rating Watch Negative (RWN).
“UML’s already tight liquidity may worsen, if the transaction is not concluded by December 2017, which will be negative for its ratings,” the rating company said.
The ₹4,375-crore turnover (consolidated) company had a net debt of ₹3,718 crore, including nearly ₹3,300 crore long-term debt, in 2016-17. The net loss stood at ₹359 crore.
Liquidity pressure“Though there is day-to-day pressure on working capital, we have been able to service our debt as on date,” Rajeev Jhawar, Managing Director, Usha Martin, told BusinessLine .
According to Jhawar, the asset sale is taking “longer than expected”. The company appointed Royal Bank of Canada as a merchant banker for looking at prospective buyers. BCG is advising the company on turnaround strategy.
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