India Ratings and Research has downgraded state-owned BHEL’s longterm issuer rating to ‘IND AA+’ from ‘IND AAA’ and a negative outlook has been assigned to all long-term ratings.
“IndRa has downgraded Bharat Heavy Electricals Ltd’s (BHEL) longterm issuer rating to ‘IND AA+’ from ‘IND AAA’. Simultaneously, all ratings have been removed from Rating Watch Negative (RWN) and a negative outlook has been assigned to all longterm ratings,” BHEL said in a BSE filing today.
BHEL’s revenue declined by 47 per cent over FY13FY16 because of low order intake over FY12FY15 and the presence of slowmoving projects worth nearly Rs 500 billion in its order book in FY16.
According to provisional FY16 financials, revenue declined 15 per cent YoY to Rs 251 billion, as against IndRa’s expectation of revenue growth in FY16.
“The negative outlook reflects IndRa’s expectations of a further revenue decline over FY17, if issues related to the slowmoving order book are not resolved,” it said.
BHEL has been looking at diversifying its revenue base into areas such as defence, water, transportation, transmission and industrial products, to lower its dependence on the power sector.
During FY16, BHEL commissioned 15GW, up 26 per cent yoy, which is likely to aid revenue generation and debtor reduction, the filing said.
“Any significant debtled investment or acquisition and/or a significant decline in order inflow, leading to a further decline in the revenue, and/or nonimprovement in the EBITDA margins and/or an increase in the working capital cycle could lead to a negative rating action,” the filing said.