Coastal Projects set to restructure Rs 3,700-cr debt

Company has high debt; they are looking at number of options including equity raising

Hyderabad-based construction company Coastal Projects is said to be headed for restructuring loans worth Rs 3,700 crore.

At about Rs 500 crore, State Bank of India has the highest exposure to the company. Other banks with exposure to the company include Punjab National Bank, ICICI Bank, Axis Bank and IDBI Bank.

“The company has been referred to the CDR (corporate debt restructuring) cell. We are looking at it now,” said a senior official of a public sector bank. The company didn’t respond to an e-mailed query.

A private equity (PE) investor in the company said Coastal was looking at various options to resolve its debt issues. “Their debt is high, like all construction companies. They are looking at a number of options, including raising equity. There will be clarity on the course of action in the next two months,” said the investor, requesting anonymity.

HEALTH CONCERNS

• At Rs 500 crore, SBI has the highest exposure to Coastal Projects
• The company’s order book stands at about Rs 7,500 crore
• In Feb 2012, CARE Ratings downgraded its long-term debt
• Payment woes have extended working capital cycles of construction firms
• In FY13, Hindustan Construction Company and Gammon had gone for CDR

In 2008, three private equity companies—Fidelity, Deutsche Bank and Sequoia Capital—acquired 16 per cent stake in the company. Two years later, Barings, too, invested in the company, raising the total ownership of PE players in Coastal to 32 per cent.

Coastal Projects, which is primarily into building hydro power and irrigation facilities, as well as tunnelling, has an order book of about Rs 7,500 crore. The company recorded sales worth Rs 245.6 crore in 2011-12, according to data available on the company’s website.

In October 2012, CARE Ratings had suspended rating the company, as it hadn’t provided information required by the agency. In February 2012, it had downgraded the company’s long-term debt facilities to the tune of Rs 3,500 crore from CARE A+ to CARE A. “The revision in rating takes into account the deterioration in gearing levels due to increasing debt levels and the slow progress in irrigation projects in Andhra Pradesh,” the agency had said.

It added despite the company’s strong revenue growth, the ratings were constrained by the segmental concentration of its order book in the irrigation sector, as well as the capital-intensive nature of the business.

“The ability of the company to infuse equity to improve the liquidity and gearing levels, to maintain steady growth in its order book and increase segmental diversification of the same are the key rating sensitivities,” CARE had said in its last rating of the company.

Coastal is one of the many construction companies heading for CDR. Last financial year, Hindustan Construction Company and Gammon had gone for CDR. Slowing orders and project delays, along with the cancellation of many infrastructure projects, have hit many companies in this sector. Many companies have been facing payment issues from clients. This has extended the working capital cycles of construction companies, compelling them to resort to additional debt.