IL&FS (Infrastructure Leasing and Financial Services) headquarters in Mumbai. Photo: Reuters
has effected a multi-notch rating
downgrade for IL&FS, which is facing liquidity pressure
and overleverage. Its loans and debentures now carry “BB” (junk or non-investment status) as against the previous rating
of "AA+". Also, the commercial paper carries "A4" rating
against the previous rating
Ratings remain under watch with developing implications, ICRA
said in a statement. Last month, ICRA
had cut IL&FS' rating
from "AAA" to "AA+" for loans and debentures.
said the downgrade of ratings takes into account the increase in liquidity pressure
at the group level. The company is in the process to raise Rs 80 billion of funds from the promoter group (through a mix of rights issue and long term line of credit). The timely receipt of the fund is important to improve the group's overall liquidity profile.
Further clarity is awaited on the timing of these inflows and given the sizeable repayment obligations of the group's debt, this remains a key rating
sensitivity in the near term.
The ratings also factor in company's elevated debt levels owing to the funding commitments towards Group ventures coupled with slow progress on asset monetisation and deterioration in the credit profile of key investee companies.
Group is in midst of deleveraging its balance sheet and streamlining the portfolio. The ratings, however, continue to factor in IL&FS' long history of business operations in the infrastructure space, domain expertise of its senior management and its strong institutional promoters.
Over the years, IL&FS' focus has steadily shifted from project sponsorship to that of project advisory and project facilitator for development and implementation of projects.