India Ratings has downgraded Karaikal Port Pvt Ltd’s Rs 1,880 crore bank loans to Long-Term ‘IND BB’ from ‘IND BBB-’. The outlook is ‘negative’.
The agency has also downgraded the company’s Rs 25 crore working capital facility to short-term ‘IND A4+’ from ‘IND A3’.
KPPL is sponsored by the Chennai-based Marg Ltd , a real estate and infrastructure developer.
special purpose company
It is a special purpose company incorporated to undertake infrastructure development activities at Karaikal Port under a 30-year (extendable by a further 20 years by mutual consent) concession from the Government of Puducherry.
The port started operations in January 2006.
The two notch rating downgrade reflects KPPL’s lower-than-expected revenue due to significant underperformance (more than 50 per cent on a pro-rata basis) in the project’s cargo ramp-up.
Delays in the commissioning of coal-based thermal power plants in the hinterland served by the port are mainly responsible for the underperformance.
Besides, management expectations of sharp growth in other components of traffic such as fertilisers, crude/petroleum, oil and lubricants/edible oil, cement and container traffic have also not materialised, possibly due to the slowdown in the economy.
Revenue ramp-up was identified as the major rating constraint while assigning the ratings.
The agency had also highlighted concentration risk in the form of high dependence on coal imports as a concern, the agency said in its release.
According to the unaudited results for the first eight months of financial year 2013 (year ending March), the port generated an EBITDA of Rs 87 crore on a revenue base of Rs 177 crore. This was against a forecasted amount of Rs 399 crore and Rs 644 crore, respectively for the full financial year.
This was due to the low cargo throughput of 4.52 million tonnes (mt) during the eight-month period while the forecast for the full year was 16 mt, the release said.
In the light of the unsatisfactory revenue ramp-up, KPPL’s weak debt structure has accentuated pressure on its credit profile.
The port has employed a highly-geared capital structure to build large capacities in view of future demand and used medium-term debt to finance construction.
India Ratings believes that KPPL’s credit profile can be permanently repaired only by refinancing of the existing bank debt or restructuring it to reflect expected cash flows, the agency said.