India Ratings downgrades Wapcos loans on stretched working capital cycle

India Ratings has cut WAPCOS's bank loan rating from A- to BBB citing a stretched working capital cycle, reliance on debt and audit concerns, even as its order book remains strong

India Ratings has downgraded the bank loan facilities of the central public sector unit Wapcos Ltd from “A-” to “BBB” due to an elongated working capital cycle and the prospect of using debt to meet any temporary cash-flow mismatch.

 

The rating action also takes into account the government's decision to relieve the chairman and managing director (CMD) of his responsibilities following reports of suspected misconduct in the company’s operations.

 

Wapcos is a technology-driven consultancy and EPC organisation in the field of water, power, and infrastructure sectors.

 

The downgrade and negative outlook reflect Wapcos’s continued elongated working capital cycle in the financial year 2024-25 (FY25). The working capital cycle will likely remain stretched in FY26 and FY27, as the project execution continues to be largely moderate despite the presence of a large order-book, the rating agency said in a statement.  

 

 

During FY26-FY27, the company may rely on debt to meet any temporary cash-flow mismatch that could arise due to the underlying order-mix and the orders being in the stages of execution, it added.

 

India Ratings said it derives comfort from Wapcos’s strong parentage, with the entity being 100 per cent owned by the government, ensuring strategic importance and policy support, and presence of a large order-book. Its credit metrics remain comfortable.

 

Figures for FY25 are provisional. During the audit of the financial statements for FY24, the auditors highlighted an uncertainty regarding the completeness and accuracy of reported trade receivables and payables. The concern stems from inconsistencies in the underlying data and limitations in the reconciliation processes, which may have led to under- or overstatement of balances.

 

Additionally, restatements were made during the audit period to correct previously reported figures, indicating gaps in initial reporting and internal controls, the rating agency added.