Cox & Kings defaults on payments of Rs 150 crore, stock plummets 10%

Cox & Kings has defaulted on commercial paper worth Rs 150 crore, the company informed stock exchanges on Thursday. The tour operator has been facing cash crunch for some time now and has delayed salaries of senior executives for the month of May.

Suppliers, too, have refused to extend credit over fears of default. The stock has also taken a pounding in the last few trading sessions, following a credit rating downgrade.

The company’s stock fell 10 per cent on Thursday to close at Rs 40.50, and is down 33 per cent since last Friday. The stock of its financial vertical, Cox & Kings Financial Services, fell over 3 per cent to end at Rs 5.52.

Commercial paper refers to a short-term debt instrument. Cox & Kings said on Wednesday about Rs 200 crore was due for repayment to two investors holding the company’s commercial paper. “Of the aggregate amount of Rs 200 crore, Rs 50 crore has been paid; the balance Rs 150 crore has not been paid,” the company said.

“The company has been meeting its liability obligations. However, due to cash flow mismatch and a situation exacerbated by a rating downgrade, the company proposes to meet its financial obligations through a combination of internal accruals and monetisation of assets. The company is working towards plans to make good on its obligations,” it said.

“The situation at Cox & Kings remains fluid, though the company is assuring the staff to not panic,” said an industry source.

On Wednesday, rating agency Brickwork Ratings downgraded the rating of the company’s Rs 50-crore non-convertible debentures, while retaining its commercial paper rating for Rs 2,060 crore. On June 11, CARE Ratings had downgraded its rating. On a year-to-date basis, the stock is down 73 per cent.

Cox & Kings, which runs the tours and hotels business in India and abroad, has been downsizing its operations since the past few years to pare back its debt. Last October, the company sold its education tour business in Europe to Midlothian Capital Partners for an enterprise valuation of Rs 4,380 crore and used the proceeds for debt reduction. However, lower-than-anticipated debt reduction and increase in receivables have worried investors.

In its report, CARE Ratings added Cox & Kings saw significant increase in receivables, from Rs 1,524 crore in 2017-18 to Rs 2,031 crore in 2018-19 in the standalone business. On account of increase in debtors, the company’s cash flow from operations continues to remain negative. However, it held significant liquidity in the form of cash and cash equivalents of Rs 1,830 crore as of March 2019, it said.