Cox & Kings shares have declined 26% since credit rating downgrade

Credit rating downgrade highlights delays in debt reduction and increase in receivables

Shares of tour operator Cox & Kings have slipped 26 per cent since Friday, following a credit rating downgrade which highlighted delays in debt reduction and increase in receivables.
 
The stock declined 9.9 per cent on Wednesday to close at Rs 45 on the BSE after Brickwork Ratings downgraded rating of the company’s Rs 50-crore non-convertible debentures or NCDs, while retaining its commercial paper rating for Rs 2,060 crore.
 
On June 17, CARE Ratings had downgraded its rating. On a year-to-date basis, the stock is down 73 per cent.
 
Cox & Kings, which runs tours and hotels business in India and overseas, has been downsizing its operations since the last few years to pare 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.  An industry source said Cox & Kings has been delaying salaries to its employees for the last few months. The firm’s suppliers, too, have become cautious on extending credit to the firm over fears of default.
 
“Total debt of Cox & Kings in FY19 stood at Rs 3,238 crore, against Rs 4,014 crore in FY18. Sale of the education business has enabled the company to reduce debt to a certain extent. The firm has envisaged another monetisation of an overseas asset by the end of calendar year 2019 to pare debt. Timely asset sale and consequent reduction in debt will remain a key rating monitorable,” CARE Ratings said in its report, downgrading the company debt.
 
The rating agency said Cox & Kings saw a significant rise in receivables from Rs 1,524 crore in FY18 to Rs 2,031 crore in FY19, on a standalone basis. On account of increase in debtors, the firm’s cash flow from ops continues to remain negative. However, it had liquidity in the form of cash and cash equivalents of Rs 1,830 crore as of March 2019.