Jvsl Rs 635cr Debenture Downgraded

Crisil has downgraded the Rs 635-crore non-convertible debenture issue of Jindal Vijayanagar Steel Ltd (JVSL) to BBB- from BBB on account of increased risk in project funding. The revised rating is just a notch above the inadequate safety grade.

The project cost for the 1.6-million tpa HR coils project using Corex iron making/basic oxygen furnace steel has increased from the originally envisaged Rs 3,300 crore to Rs 4,138 crore due to changes in the scope of the project and depreciation of the rupee. This increase in the project cost is to be partly funded through debt and partly through additional equity contribution of Rs 126 crore from the promoters which has to be brought in by March 1998.

 

The Jindal group is expected to face a liquidity crunch due to on-going projects within the group as well as financial commitments in other group companies. Additionally Rs 250 crore has to be collected from the public/financial institutions/ mutual funds etc as call money from the equity issue. Since the fully paid-up shares of JVSL are presently quoting below par value, the uncertainty of getting the funds from the public has increased.

Crisil has also downgraded the Rs 23.3-crore partly convertible debenture issue of Balmer Lawrie Van Leer Ltd. The performance of the closures division in the past one year has been adversely affected on account of electroplating quality problems for the Far Easterm markets. This has led to a drop in sales in the second-half of 1995-96 and the first-half of the current fiscal.

Crisil has also downgraded the fixed deposit programme of Master Trust Ltd to FA- from FA+, indicating satisfactory safety. The company has had a significant exposure in the inter-corporate deposit (ICD) market and has also deployed significant amounts as advances to subsidiary companies. The repayments on some ICDs have been delayed due to the liquidity crunch faced by its clients. This is likely to affect the companys profitability as it impairs its ability to re-deploy its funds.