Moody's downgrades Lodha's ratings on weaker operating numbers

Moody's Investors Service has downgraded realty firm Lodha Developers' unsecured debt and corporate family ratings on lower than expected operating performance during last fiscal.
The outlook on the ratings is negative, which reflects a challenging operating environment for real estate companies in India and the company's weak credit metrics and liquidity position, Moody's Investors Service said in a statement.
"Moody's Investors Service has downgraded the corporate family rating of Lodha Developers Pvt Ltd (LDPL) to B1 from Ba3.
"Moody's has also downgraded the senior unsecured debt rating of the US dollar denominated bonds issued by Lodha Developers International Ltd and guaranteed by LDPL to B1 from Ba3," the statement said.

Moody's Vice President and Senior Credit Officer Vikas Halan said the "downgrade reflects our expectation that the company's credit metrics will fail to improve to a level more appropriate for its ratings over the next 12-18 months."
Lodha's operating performance would remain well below the original expectations made when the ratings were assigned for the first time in November 2014 and also below the reduced expectations in June 2015, Moody's said.

"The company made operating sales of Rs 64.3 billion for fiscal 2016 against Moody's expectation of Rs 90-93 billion. Cash collections of Rs 62 billion made during the year, though higher than last year's collection by 14 per cent, were lower than Moody's expectation of Rs 75-80 billion for fiscal 2016," Moody's said in a statement.

The weak operating performance has also resulted in the increase in borrowings to Rs 133 billion as of 31 March 2016, compared to Rs 118 billion a year ago, it added.
Lodha Developers' targets to achieve Rs 90 billion in cash collections in fiscal 2017, Moody's said.
Stating that Lodha Developers' liquidity profile was weak, Moody's said the company needs to refinance GBP 75 million by June 2016 and another GBP 225 million by December 2016. These debt maturities are with respect to the London assets.
"The company is in advanced stages of refinancing its debt maturing in June 2016 and we expect them to be able to refinance the same. Nonetheless, the refinancing risk will remain as the December maturity approaches," Moody's said.

Lodha Developers is focused on residential development in the Mumbai Metropolitan Region with some projects in nearby Pune. The company along with its promoters has expanded into the London market by acquiring two properties, now in the process of development.