Care Set To Downgrade Maharashtra Bonds

Rating agency CARE is set to downgrade all Maharashtra government bonds from A+ to A- category this week in view of the recent bond servicing delays in the Maharashtra Krishna Valley Development Corporation (MKVDC) and the Konkan Irrigation Development Corporation (KIDC).

CARE officials refused to comment but market sources confirmed the development. While the A- grading indicates a lower medium grade instruments category and declined credit rating, it still accords the bond issue with adequate safety status.

Rating agencies Icra and Crisil have already downgraded the state government bond issues.

It may be recalled that the MKVDC had defaulted on interest payments of Rs 74 crore to institutional investors on its bonds due by March 31. This was the first instance when a state government-guaranteed paper had defaulted. Subsequently, on April 24, this interest payment was made by MKVDC.

 

Last week, KIDC came out with a Rs 80 crore bond issue with a downgraded A- rating by CARE and it is expected to extend this rating to all other state government bond issues including the Maharashtra State Electricity Board (MSEB).

Apart from the parameter of delayed payments, the state of the economy and fiscal deficit are considered before assigning the rating. The financials of the Maharashtra government have been found to exhibit only a marginal deterioration which is not considered significant, according to the market sources.