Tulip Telecom fails to pay interest on debentures

India Ratings downgrades rating for NCDs to 'D'

Rating agency India Ratings has downgraded the rating for Tulip Telecom Ltd’s non-convertible debentures (NCDs) to “D” grade as company defaulted on interest payments.

The downgrade reflects Tulip’s defaults on interest payments to debenture holders (NCDs of Rs 125 crore), which were due on 30 December 2012, India ratings said.

Financially troubled Tulip’s financial leverage in the 12 months ended March 2012 increased to 3.6x from 2.3x in FY11. This rise in financial burden was due to a higher-than-expected increase in gross debt to Rs 2,750 crore from Rs 1,780 crore for large capital expenditure and investments and higher working capital requirements.

In August 2012, its National Long-Term rating was cut to “D” from “BB+”. The agency had also downgraded NCD Rs 125 crore to “C” from “BB+”.

In the 18 months ended September 2012, Tulip generated revenue of Rs 4,060 crore.

Tulip is an end-to-end data connectivity services provider. Its business segments - data connectivity solutions, managed services and network integration - provide data services, IT infrastructure and network solutions to enterprise clients and government entities.

The future developments that may lead to positive rating action include timely payment of debt obligations for at least six months.