KEC International down 5% as CARE Ratings downgrades co's bank facilities

CARE Ratings downgrades KEC International's bank facilities; keeps outlook 'Stable' for company

KEC International shares slipped as much as 5 per cent on the NSE, registering an intraday low of Rs 939.3 per share on Friday. The decline in the stock came after CARE Ratings, a leading credit rating agency in India, downgraded the company's long and short-term bank facilities.

At around 11:54 AM, shares of KEC International were down 4.48 per cent at Rs 942 per share on NSE. In comparison, the NSE Nifty traded 275.35 points higher at 25,691.15 around the same time.

As per the filing, CARE Ratings has downgraded the company's long-term bank facilities of Rs 3,000 crore to 'Negative' from 'CARE AA-'. For Rs 500-crore non convertible debentures, a 'CARE A+; Stable' rating has been assigned.

CARE Ratings said that the revision in the ratings assigned to bank facilities and instruments of KEC International considers lower-than-envisaged recovery in its gross current assets in FY24 and Q1FY25  leading to prolonged elongation of gross current asset days (GCA), continued reliance on working capital borrowings including short term debt and leveraged capital structure.

Moreover, adjusted total outside liabilities to tangible net worth (TOL/TNW) also steadily deteriorated from 3.57x as of March 31, 2022, to 4.27x as of March 31, 2024.

Furthermore, higher debt levels and moderate profitability led to a steady deterioration in debt coverage indicators. The interest coverage ratio steadily declined from 3.44x in FY21 to 1.71x in FY24.

The rating agency has assigned a 'Stable' rating to KEC International.

"The 'Stable' outlook assigned to KEC reflects that the company’s operating income and profitability will be well-supported by its healthy order book position and strong execution capabilities. The expected improvement in GCA days shall lead to consequent rationalisation of debt levels," the filing read.

In the past one year, shares of KEC International have gained 48.5 per cent against NSE Nifty's rise of 27.7 per cent.