CARE Ratings has downgraded the rating for debentures of Morgan Credits Pvt Ltd (MCPL), an entity connected with Rana Kapoor family, from “BBB- “to “BB” on delay in monetisation of identified investments.
The delay in timely monetisation could be further exacerbated by the ongoing investigation of the promoters of MCPL by the Enforcement Directorate (ED) and Central Bureau of Investigation.
"The above mentioned investigation may adversely impact the valuations of the identified investments as well as cause elongation in timelines for divestment of the companies," CARE said in statement.
The rating remains constrained by the moderate profitability and MCPL being a holding company with minimal recurring cash flows with various investments in nascent stages.
MCPL is a holding company having investments in various non-financial businesses. Until September 30, 2019, MCPL was a promoter entity of Yes Bank holding 3.04 per cent stake and thus MCPL received dividend income of Rs. 14.5 crore in H1FY20, CARE said.
Its directors of the Company are Radha K Khanna, Raakhe K Tandon and Roshini Kapoor. They collectively hold 100 per cent equity stake (split equally between the three) in MCPL.
The rating continues to factor in the experienced management of MCPL, diversified investments, substantial reduction of debt prior to maturity and identified investments for redemption of the balance debt.
The liquidity profile of the company remains weak. As on September 30, 2019, the company had cash and bank balance of Rs 0.92 crore and no current investments. However, the company is looking for divestment of its investment for redemption of the zero coupon bond of Rs 106.3 crore which has maturity date of April 2021, it said.