Talwalkars Group stocks plunge up to 70% in four weeks on ratings downgrade

Talwalkars Healthclubs and Talwalkars Better Value Fitness informed the stock exchanges that they have defaulted on interest payments

Shares of Talwalkars Group companies – Talwalkars Healthclubs (THL) and Talwalkars Better Value Fitness (TBVFL) – were on Friday locked in their respective lower circuits for 12th trading session in a row after various rating agencies downgraded the companies' long-term facilities and debenture issues. The market price of these stocks hit new lows at the bourses today.

“The CARE Ratings and ICRA have revised the ratings of the company due to reduced financial flexibility of THL, TBVFL and its promoters, following the significant decline in the share price of these companies in the last two weeks,” Talwalkars Group companies said in a separate regulatory filing.

Both these companies informed the stock exchanges that they have defaulted in the payment of interest on loan from banks/ financial institutions.

THL was locked in the lower circuit of 5 per cent at Rs 30 per share, plummeting 71 per cent in the past four weeks from Rs 103 (on July 5, 2019) to Rs 30.10 (today's low). There were pending sell orders for 2 million shares on the NSE and BSE at 12:30 pm.

TBVFL, too, was frozen in the 5 per cent lower circuit at Rs 16 per share, slipping 69 per cent from level of Rs 52 during the same period. There were pending sell orders for 2 million shares on both the exchanges.

"Ratings have been placed on credit watch with negative implications on account of expected weakening in liquidity due to reduction in market capitalisation and rating trigger clause in non convertible debenture (NCD’s). CARE is monitoring further developments with respect to above mentioned events and would take up review of rating when more clarity emerges in this matter," CARE Ratings said in its rating rational.

The rating revision of TBVFL (combined) factors in significant reduction in market capitalisation affecting financial flexibility of the company. The significant reduction in market capitalisation can also impact the various fund raising plans through asset monetisation/equity infusion/sale of investments thereby delaying deleveraging of the business. The company also has rating trigger clauses (as specified by the management) in NCDs which, if exercised, could severely impact liquidity and debt servicing ability of TBVFL (combined), it said.

On the other hand, ICRA has downgraded the rating for the Rs 80 crore NCD programme of TBVFL to 'ICRA B-' from 'ICRA BBB'. The outlook on the long-term rating continues to remain Negative. The rating continues to remain in the ‘Issuer Not Cooperating’ category, the rating agency said in rating action dated August 1, 2019.