Standard and Poor’s (S&P) on Wednesday lowered its long-term corporate credit rating on Rolta India to ‘SD’ from ‘CCC-’ post payment default by the company on a credit facility. The agency also placed the issue ratings on CreditWatch with negative implications. S&P attributed the downgrade to Rolta India having missed payments on its credit facilities by more than 30 days.
“We lowered the issue ratings to reflect an imminent risk of default. We see a very high probability that Rolta may not be able to make the interest payments on its guaranteed notes,” the agency said in a media release.
Bloomberg data shows that at the end of September 2015 the firm’s total debt stood at Rs 5,371.90 crore. In FY16, net profit fell 23% year-on-year to Rs 189.11 crore on the back of Rs 3,799.59 crore in revenues. The firm had an interest outgo of Rs 476.74 for the year.
As per the media release, Rolta admitted on May 30 that it had missed a $6.8 million coupon payment due on its 2018 unsecured bonds and is negotiating an extension on one of its credit facilities due since March 2016. “In our view, this constitutes a selective default by the company. The company said that it intends to make the interest payment on the notes within the 30-day grace period ending June 15, 2016. But, Rolta has not shared any detailed plan to rectify the missed payments situation and avoid any future defaults,” S&P observed.
Rolta’s liquidity unexpectedly deteriorated in the fourth quarter of fiscal 2016 due to mounting receivables, mainly from the government of India’s defense and homeland security projects, the report said. “The negative CreditWatch on Rolta’s guaranteed unsecured notes reflects our view that the company is highly vulnerable to non payment of interest within the grace period,” it said.
Rolta Americas, a wholly-owned subsidiary of Rolta India, had issued bonds worth $300 million in July 2014 at a coupon rate of 8.875%. The bonds have a tenure of five years and are guaranteed by Rolta and its key subsidiaries.