Credit rating agency Crisil has downgraded its ratings on the bank facilities of Lanco Infrastructure Ltd (LITL), part of the diversified Lanco Group, to BBB- from Crisil BBB+ .
According to the rating agency, this downgrade reflects Crisil's belief that LITL's risk profile will remain under stress over the medium term as LITL has large exposure to under implementation project special purpose vehicles (SPVs) and also because of its mining assets in Australia.
Crisil has rated total bank loan of Rs 9,024 crore.
Lanco had acquired Griffin Coal Mining Pty Ltd, and Carpenter Mine Management Pty Ltd last year. In the absence of equity infusion, LITL's financial risk profile will weaken further, Crisil notes in its report.
Over the last one year, LITL's equity investments, loans and even advances in its project SPVs have increased substantially. These SPV are at various stages of implementation and some are scheduled for commercial operations. Yet, they may not be able to upstream substantial cash flows to the parent owning to initial stage of operations.
In addition, if there is delay in disbursal of loans by bankers, this may result in delays in execution of EPC business, Crisil ratings observed.
The financial risk profile has been already weakened by the acquisition of Griffin Coal. Further, its large exposure to the SPVs is expected to yield returns over next one to two years. The operating losses of Griffin Coal are further constraining its financial risk profile. Therefore, Crisil believes that LITL's financial risk profile will remain under pressure due to lack of cash flows over the next two years.