Ratings agency ICRA has downgraded the ratings on the non-convertible debentures (NCD), commercial paper, term loans, fund-based and non-fund based limits of Jindal Steel and Power Limited (JSPL), according to a release. It has also revised the long-term ratings on NCD programmes of Jindal Power. ICRA indicated that in the absence of sizeable divestments, the gross debt for JSPL at consolidated level, which stood at Rs 45,312 crore as of June 30, 2015, is likely to remain at similar levels thereby putting pressure on its credit profile.

According to data from Value Research, schemes such as JM Floater Long Term Fund had exposure of around 23.38% in the papers of Jindal Steel and Power as at the end of August 2015.

Other schemes such as LIC Nomura MF Liquid Fund, Union KBC Liquid Fund and Franklin India Ultra Short Bond Fund-Institutional Plan had holdings in the range of 2-3.25% in the papers of JSPL as at the end of July 2015.
ICRA has revised the long term rating for Rs 3,212 crore non-convertible debentures, Rs 18,838.75 crore term loans, Rs 4,150 crore fund based limits and Rs 6,800 crore non-fund based limits of JSPL from [ICRA]AA- to [ICRA]A+.

It has also revised short term rating for Rs 1,250 crore commercial paper/short term debt programme, and Rs 2,500 crore short term loans of JSPL from [ICRA]A1+ to [ICRA]A1. The ratings for Rs 899.25 crore of unallocated limits of JSPL have also been revised to [ICRA]A+/ [ICRA]A1 from [ICRA]AA- / [ICRA]A1+, the release said.

“The ratings have been removed from ‘rating watch with negative implications’ and a ‘negative outlook’ is assigned to the long term rating of JSPL,” it said in a release.

The revision of ratings takes into account deterioration in JSPL’s credit metrics led by lower sales realizations in steel business and consequently weaker operating profitability and cash flow from operations at a time when its debt is at an elevated level, ICRA said.

It also added that while the company is actively looking at divestment of stake in some subsidiaries/assets, and has already carried out or is in advanced stage of completing few small to medium size divestments, larger divestments would take some time to materialize. The ratings agency has also revised the long term rating of Jindal Power (JPL) from [ICRA]AA- to [ICRA]A+ and reaffirmed the short term rating at [ICRA]A1+ for Rs 7,688 crore bank lines. It also revised the long term rating for Rs500 crore NCD programme of JPL from [ICRA]AA- to [ICRA]A+. The ratings continue to be on ‘watch with developing implications’, it said.

ICRA said that the revision of JPL’s long term rating takes into account moderation in the financial performance and debt coverage indicators of JPL and the challenges in the short to medium term till the coal availability, and power evacuation issues are resolved and the company is able to enter into Power Purchase Agreements.

The rating revision also factors in the deterioration in the credit profile of its parent company – JSPL and strong linkages between the two companies.