Satyam?s baby, Maytas Infrastructure Ltd may find the going more difficult with credit ratings agency ICRA suspending the ratings assigned to it. The ratings of LBBB and A3 (both with negative outlook) were suspended by ICRA on Monday.
?The rating suspension follows the recent development at Satyam Computers,? a release said. Maytas Infra is promoted by the sons of founder and former Satyam chairman B Ramalinga Raju. The company has fudged its accounts by understating the revenue in the April to June quarter in 2008.
Last week, Andhra Pradesh chief minister YSR Reddy has asked his chief secretary to review all projects being implemented by Maytas Infra and Maytas Properties.
?As a rating agency, we are just stating that we can not rate a company without establishing the veracity of information furnished by it,? said ICRA senior vice president Vikas Aggarwal. The suspension of the credit ratings will mean that the company will find it difficult to raise funds for ongoing projects even as the Andhra Pradhesh government is reviewing the projects being developed by the company. This will be especially critical for the Hyderabad Metro Rail project which is yet to achieve financial closure.
The Rs 12,200 crore Hyderabad Metro Rail project is already facing funding problems. Of the Rs 3,660 crore of equity required for the project, Maytas still has to raise about Rs 1,300 crore. Similarly for the debt component of Rs 8,540 crore, it has secured only 60% (Rs 5,124 crore).
Maytas Infra is involved in projects worth Rs 18,000 crore in the state including the Hyderabad Metro Rail project, Pranahita-Chevella Lift Irrigation project, Machlipatnam Port and several irrigation projects. But even before the Satyam fracas broke, it is learnt that Maytas Infra was already under severe financial strain. Sources said the cost of projects it is involved in is much higher than its net worth. The company is also facing problems of cash flows because of delays in completion of projects.
The suspension comes days after ICRA downgraded the ratings of Maytas. On the day the Satyam scandal broke out on January 7, ICRA had downgraded the LA+ rating against the Rs 3 billion term loans, the Rs 2.63 billion fund based limit, the Rs 2.5 billion long term non convertible debenture programme and the Rs 19.83 billion non fund-based limit of Maytas Infra to LBBB with negative outlook.
While downgrading the credit rating of Maytas Infra, ICRA had also highlighted its stressed liquidity position as well as it?s higher than anticipated debt levels. The significant planned investment in build-operate-transfer projects and the execution and operation risks associated with the Hyderabad Metro Rail Project and the Machlipatnam Port, where financial closure is yet to be achieved were also other factors for the downgrade.