Dilip Buildcon slips 5% after CRISIL downgrades long term bank facilities

Dilip Buildcon said the outlook may be revised to 'Negative' if the liquidity position does not correct and continues to remain stretched.

Dilip Buildcon shares fell 5 percent in morning on Wednesday after CRISIL downgraded its rating on company's long term bank facilities and NCD to A/Stable from A+/Stable.

The agency reaffirmed its short term and commercial paper rating at A1.

"The downgrade factors in the company's stretched liquidity position as reflected by the near full utilisation of bank limits (average 95 percent over the 12 months through September 2018)," the rating agency said.

CRISIL further said liquidity is stretched as the company has incurred significant expenses of Rs 500 crore in mobilisation and pre-operative work for its 12 hybrid annuity (HAM) projects prior to the receipt of appointed date, thus receiving no mobilisation advance for these projects, which in turn resulted in high working capital requirement.

This coupled with delay in receiving enhancement on the bank lines has stretched the liquidity position, it added.

Timely enhancement in the company's bank lines and inflows from the Shrem deal and receipt of mobilisation advances for the HAM projects are key monitorables, it said.

It further said the ratings continue to reflect the company's established market position, backed by strong project execution capability, healthy operating margin, robust orders providing revenue visibility over the medium term, and moderate financial risk profile marked by a moderate capital structure.

"These strengths are partially offset by working capital-intensive operations and exposure to cyclicality in the construction industry," it added.

CRISIL believes Dilip Buildcon will benefit over the medium term from its established market position and robust orders.

The outlook may be revised to 'Positive' if liquidity improves significantly with timely and sufficient enhancement in bank lines and with realisation from Shrem deal, while the company maintains its operating performance, according to rating agency.

The outlook may be revised to 'Negative' if the liquidity position does not correct and continues to remain stretched, it said.

At 11:10 hours IST, the stock was quoting at Rs 390.85, down Rs 20.60, or 5.01 percent on the BSE.

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