New Delhi: The debt of the flagship company of Shapoorji Palanji Group, the largest shareholder in Tata Sons, was on Thursday downgraded by a domestic rating agency. Shapoorji Pallonji & Company Pvt Ltd’s (SPCPL) debt of Rs 19,600 crore in multiple instruments has been downgraded to BBB+/A2 from A- (with stable outlook)/A2+, and placed on rating watch with evolving implications According to one statement.
ICRA said delays in achieving expected working capital limits, which have impacted engineering, procurement and construction (EPC) operations in FY23, resulted in modest profitability and muted debt coverage metrics. Its line of credit was placed for restricted use in March 2022 as a part of the One Time Restructuring (OTR) plan, which constrained order execution in FY23, it said, in view of adequate working capital at the time But adding clearance is critical to supporting development. Core operations in the medium term?.
The ‘look with developing implications’ approach is driven by its business restructuring plan, the agency said, adding that the guiding principle is to convert SPCPL into a hold-cum-operating company with only construction business. to operate. , while real estate as well as other business verticals will be carved out under separate companies, which will also be directly/indirectly owned by the promoters.
The agency said the restructuring process is likely to release capital and also limit the incremental funding requirement from SPCPL to these businesses. At the consolidated level the rating is constrained by the leveraged capital structure and SPCPL has also provided credit support to various subsidiaries and associate companies for loans raised by them through corporate and DSRA (Debt Service Reserve Account) guarantees.
The agency said it notes that the promoter group plans to raise capital in the near term and going forward, the ability of the promoter group to improve operating profitability with asset monetization or capital infusion remains critical from a credit perspective .
The company’s consolidated external debt is expected to reduce by Rs 15,300 crore to Rs 21,870 crore by December 31, 2022 from Rs 37,170 crore as on August 31, 2020, the agency said, and is expected to further reduce through asset disinvestment.
The agency said SCPCL’s credit strengths include being the flagship company of the Shapoorji Palanji Group, which is the largest minority shareholder in Tata Sons, and its strong execution capabilities. On the credit challenges front, it pointed to modest profitability in core construction works and large liabilities.