CARE puts rating for Rana Kapoor family owned firm in default grade

CARE Rating has downgraded rating for debentures of Morgan Credit Private Ltd (MPCL), a Rana Kapoor family owned firm, from “BB” to “D” grade as it failed to make payments to investors of non-convertible debentures.
 

The revision in the rating of the instrument is on account of company’s inability to repay post exercise of the put option by the investor on account of stretched liquidity, CARE said in a statement.
 

Rating revision journey began in the second quarter of last financial year (Fy20). In September 2019, it was downgraded from “A-“ to “BBB-“ and later from “BBB-“ to “BB” in March 2020.
 

MCPL is a holding company having investments in various non-financial businesses. The directors of the Company are Radha K Khanna, Raakhe K Tandon and Roshini Kapoor. They collectively hold 100 per cent equity stake (split equally between the three) in MCPL, CARE said.
 

MCPL had identified unlisted investments for divestment for the repayment of the balance outstanding debt. Additionally, MCPL had created a pledge on the unlisted shares of these identified investments in favour of the debenture trustee.
 

However, there have been elongation in the timelines for the disinvestments which further escalated since March 2020. On account of the same, company witnessed liquidity stretch.
 

The maturity of the rated instrument was April 21,2021. But as investor exercised put option, the strain on the liquidity elevated further. The investor gave notice (June 12,2020) with the put option date being July 19, 2020. The put option date was falling on a non-business day so the payment was to be made on July 17,2020. However, the company has failed to make the payment, rating agency added.
 

CARE said the major operating companies of MCPL have a track record of maximum of three years. These non-financial businesses are presently in growth stage and are yet to break even.
 

Some of the more mature companies such as RAVI Integrated Logistics and RAVI Renewables are projected to start generating positive cash flows from FY20 onwards which would be utilized to pay dividend to MCPL. Some of the other mature companies include DoIT Sports, DoIT Talent Ventures and Azure Entertainment.