ICRA puts Fortis Healthcare on ‘watch’, hands ‘negative’ to Deepak Fertilizers

In ratings reviews that it published on Wednesday, credit rating agency ICRA downgraded the long-term rating of Deepak Fertilizers while placing that of Fortis Healthcare on watch.

For Deepak Fertilizers and Petrochemicals Corporation, ICRA revised the long-term rating assigned to the ₹600-crore non-convertible debenture programme, ₹575-crore (increased from ₹500 crore) long-term fund-based limits and ₹141.44-crore term loans from AA to AA-, the agency said in a note. The outlook on the rating is negative. It reaffirmed the short-term rating assigned to the ₹750-crore commercial paper programme and ₹1,425-crore (reduced from ₹1,500 crore) non-fund-based limits of the company at A1+. The ratings downgrade, ICRA said, takes into account the deterioration in the financial profile of the company, owing to the “continued regulatory overhang over the gas supply issue and the recovery of unintended benefits from players manufacturing Nutrient “N” using domestic gas.

Moreover, the company’s working capital position has weakened over the last one year due to holding up of subsidy payments by the Department of Fertilisers’ pending recovery of unintended benefits, resulting in significant build-up of short-term debt.”

The company manufactures Nitro-Phosphate and Bentonite Sulphur fertilisers, and industrial chemicals, such as low-density ammonium nitrate, methanol, nitric acids and iso propyl alcohol.

Credit instruments with Fortis Healthcare have been placed on watch. ICRA said the A+ assigned to the ₹250-crore NCD programme and the ₹200-crore fund-based limits of Fortis Healthcare (FHL) are on watch with developing implications. Additionally, the short-term rating A1+ assigned to the ₹1,000-crore commercial paper/short-term debt programme is also on watch with developing implications.

The ratings have been placed “on watch with developing implications” following the imposition of penalty of approximately ₹503 crore by the Government of the National Capital Territory of Delhi on Fortis’ subsidiary, Escorts Heart Institute and Research Centre.

The fine has been imposed after the High Court of Delhi set up a committee to compute the notional loss to the government caused by violation of the land allotment agreement wherein free treatment (up to a predetermined limit) has to be provided to poor patients. The penalty pertaining to the ‘unwarranted profits’ is to be deposited with the government by July 9.

About 72 per cent of the stake in Fortis Healthcare, which has a nationwide chain of 54 hospitals, is held by brothers Malvinder and Shivinder Singh, the former promoters of pharmaceutical company Ranbaxy.

On Wednesday, shares of Fortis closed down 1.32 per cent at ₹160.80 on the BSE, while those of Deepak Fertilizers closed down 0.98 per cent at ₹161.35.

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