The rating agency said that delayed collection of government receivables and erratic monsoons continue to stress Jain Irrigation’s cash flows
Rating agency S&P Global on Tuesday downgraded the credit rating of Jain Irrigation Systems to ‘SD’ from ‘CCC’ as it missed principal payments of `375 crore under its Indian working capital facilities. At the same time, rating agency also lowered rating on the company’s guaranteed $200 million senior unsecured notes to ‘CC’ from ‘CCC’ and removed the ratings from CreditWatch, where they were placed with negative implications on July 26, 2019.
The stock of Jain Irrigation on Tuesday ended at `13.60 up by 0.37% on BSE. Data from Bloomberg showed that total debt of the company stood at `4,856 crore as on March 2019 . “We see a high likelihood that the company would be classified as a non-performing asset by its relationship bankers. Jain Irrigation’s bankers have also appointed a restructuring consultant. We believe the cross-default clause under the company’s guaranteed senior unsecured notes may also be triggered by virtue of Jain Irrigation being a guarantor and obligor on the notes,” said S&P Global Ratings in their statement.
The rating agency also said that delayed collection of government receivables and erratic monsoons in India continue to stress Jain Irrigation’s cash flows. Delays in the approval of a planned `400 crore incremental bank loan have compounded Jain Irrigation’s business stress and created a liquidity crisis that has caused the company to delay repayments on its existing working capital facilities — in some cases beyond 30 days.
The ‘CC’ rating on the $200-million note suggests that a default is a virtual certainty, barring unforeseen, material positive developments in Jain Irrigation’s operations and relationships with lenders. “In our opinion, the late exit of monsoons will further cripple Jain Irrigation’s cash position over the next two to three months. We see a small chance that the company’s business will recover from a pickup in retail business or from collection of receivables from its government contracting business. We believe Jain Irrigation’s international operations are sizable, albeit with significant linkages with the Indian operations. Therefore, in our view, there is a significant likelihood that Jain Irrigation’s liquidity crunch would spread to its international business, leading to a default on its US dollar bonds as well,” said S&P Global Ratings.
Last week Care Ratings had also downgraded long-term and short-term bank facilities of Jain Irrigation Systems. Established in 1986, the company operates in diverse segments of the agri-business and also offers products in renewable energy segment. The micro-irrigation systems (MIS) (drip and sprinkler) is the flagship product of the company wherein JISL offers end-to-end water solution projects.