Fedders Electric tanks 46% in 6-days as CARE revises credit rating

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Shares of Fedders Electric and Engineering (formerly Fedders Lloyd Corporation) are locked in their lower circuit of 10% at Rs 28.85 per share, extending their decline on the BSE in the past five days, after the rating agency CARE Ratings revised the rating of the long and short term bank facilities of the company.

The stock trading at its 52-week low price has tanked 46% in past six trading sessions from Rs 53.60 on June 21, 2018.

CARE has revised rating of Fedders Lloyd Corporation’s long term bank facilities worth Rs 4.60 billion to ‘D’ from ‘BB’. The rating agency has also revised rating of company’s short term bank facilities worth Rs 7.62 billion to ‘D’ from ‘A4’.

The revision in the ratings assigned to the bank facilities of Fedders Electric & Engineering takes into account the stressed liquidity due to certain cash flow mismatches primarily on account of long pending receivables from its offshore debtors and deterioration in the financial risk profile of the company as reflected in its declining profitability margins & further write off of certain bad debts in the 9months ending Dec 31, 2017 (refers to period from April 01 to Dec 31), CARE Ratings said in a press release dated June 22, 2018.

The ratings revision also factors in high working capital intensity of operations with elongated receivables, ineligibility of the company for participating in World Bank funded projects and exposure of the company towards raw material price volatility and susceptibility to forex fluctuation risk, it added.

Going forward, efficient management of working capital cycle, settlement of pending claims with clients and the ability of the company to scale up its operations along with enhancement in its profitability margins would be the key rating sensitivities, CARE said.

Fedders Electric and Engineering has yet not declared its fourth quarter and full year results for the financial year 2017-18.