India Ratings revises Capacite Infraprojects' Outlook to Negative, affirms 'IND A'

India Ratings and Research (Ind-Ra) has revised Capacite Infraprojects Limited's (CIL) Outlook to Negative from Stable while affirming its Long-Term Issuer Rating at 'IND A'.

Ind-Ra has taken a consolidated view of CIL and its 100% subsidiary CIPL-PPSL-Yongnam Joint Venture Constructions Private Limited, while joint ventures (JV) and associates have been included in financials using the equity method of accounting. Furthermore, the agency has not consolidated the expected cash flows from the Maharashtra Housing and Development Authority (MHADA) project, since the project is being executed through an integrated special purpose vehicle (SPV) in a JV (CIL's share: 37.1%) with Tata Projects Limited (TPL; 'IND AA'/Stable; share: 36.9%) and CITIC Construction Company Limited, China (share: 26%). The debt raised for the MHADA project is likely to be repaid from the cash flows of the project itself, with no recourse to CIL's cash flows. Any potential shortfall funding as well as any capex for the project will be funded through the debt tied up by the SPV.

The Negative Outlook reflects the likely fall in CIL's cash flows and the consequent deterioration in its credit metrics in the near term due to a stretched receivables cycle on demand slowdown in the real estate sector. This is likely to be exacerbated by the COVID-19 outbreak, leading to a considerable slowdown in the implementation pace of the company's order book, which is largely concentrated in the Mumbai Metropolitan Region (MMR), one of the worst affected areas in the country. The agency believes a combination of all these factors is likely to negatively affect the liquidity of the company in the near term. As such, the company is planning to raise funds through a combination of INR1,000 million NCDs and additional term loans to meet its liquidity requirement. In addition, the timely tie-up of increased working capital requirement, if any, due to a stretch in the receivables or inventory cycle, remains critical. However, CIL has bagged adequately funded projects from government agencies such as City and Industrial Development Corporation (CIDCO), the Department of Telecom - central government and Municipal Corporation of Greater Mumbai, which may partially offset the risk of an increase in its receivables cycle.

Shares of Capacite Infraprojects Ltd was last trading in BSE at Rs.106.3 as compared to the previous close of Rs. 100.75. The total number of shares traded during the day was 4559 in over 262 trades.

The stock hit an intraday high of Rs. 106.9 and intraday low of 89. The net turnover during the day was Rs. 451795.

Source : Equity Bulls

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