CARE revises ratings of Hindustan Construction Company Ltd

CARE has revised the ratings of bank facilities from CARE D (Single D) to CARE B+; Stable (Single B Plus; Outlook: Stable) and withdrawn the outstanding ratings assigned to the bank facilities (II - referred above) of Hindustan Construction Company Ltd. (HCC) with immediate effect. The above action has been taken at the request of HCC and 'No Objection Certificate' received from the consortium leader for the aforementioned facilities (II) rated by CARE.

The revision in ratings factor in successful implementation of debt resolution plan (RP) with subsequent regularization of debt servicing. CARE Ratings expect the liquidity position to improve with debt reduction in books of HCC as well as benefits accruing with extended repayment tenor for the Optionally Convertible Debentures (OCD) and Non-Convertible Debenture (NCD) which is likely to provide support to cashflows. The debt reduction and corresponding interest cost decrease is expected to improve the profitability. The company is also at advanced stage of asset monetization which would support the cashflows. Any deviation from the likely timelines would be a key monitorable.

The ratings also factor in satisfactory order book position which provides a long term revenue visibility and established track record of the company in the construction business.

The rating strengths are however tempered by the elongated working capital with extended collection days and working capital gap with absence of working capital lines thereby resulting in dependence upon mobilization advances and creditors funding. HCC continued to report cash loss in FY22 (refers to period April 01 to March 31) and H1FY23 and the past losses have been eroding the networth position resulting in weak solvency position. Also, HCC has extended corporate guarantee in favour of PRPL's lenders for the debt novated by it to the SPV (i.e., Prolific Resolution Private Limited, PRPL) and pledged its shares in the PRPL to secure the NCDs issued by later. While the repayment obligations of PRPL are deferred till FY27, any cashflow mismatch in the SPV in future periods and crystallization of such guarantee would be important from credit perspective.

Shares of Hindustan Construction Company Limited was last trading in BSE at Rs. 21.10 as compared to the previous close of Rs. 20.10. The total number of shares traded during the day was 9346878 in over 7879 trades.

The stock hit an intraday high of Rs. 21.30 and intraday low of 19.90. The net turnover during the day was Rs. 194252644.00.

Source : Equity Bulls

Keywords

HindustanConstructionCompany INE549A01026 HCC BankFacilities RatingRevision