Shares of Sanghi Industries Ltd’s (SIL) are currently trading down after India Ratings and Research (Ind-Ra) downgraded its Long-Term Issuer Rating to ‘D’ from ‘BB’.

SIL’s shares (of Rs 10 face value) are currently trading at Rs 69.75 apiece, down 1.50 per cent over the previous close on BSE.

Securities with “D” rating are in default or are expected to be in default soon.

Securities with “BB” rating are considered to have moderate risk of default regarding timely servicing of financial obligations.

The revised rating is on term loan (Rs 578.30 crore), non-convertible debentures/ NCDs (Rs 280 crore) and non-fund based limits (Rs 140 crore), SIL said in a regulatory filing. Prior to the rating downgrade, the outlook on the long-term issuer rating was “negative” and non-fund based limits had an “A4+” rating. Securities with this rating are considered to have minimal degree of safety regarding timely payment of financial obligations. Such securities carry very high credit risk and are susceptible to default, according to Ind-Ra’s rating scales.

Also read: SIL downgraded. Ind-Ra downgrades Sanghi Industries rating to ‘A-’ from ‘A’ 

Ind-Ra said the downgrade reflects SIL’s rescheduling of its interest obligations on rated NCDs due to liquidity issues.

According to the Securities and Exchange Board of India’s Operational Circular for Credit Rating Agencies dated 6 January 2023, rescheduling of debt instruments by lenders prior to the due date of payment to avoid default or bankruptcy will be treated as default.

The agency believes that the rescheduling was due to liquidity challenges as the company did not have any material cash balance on June 30, 2023, and its available liquidity buffer in the form of unused fund-based limits (after considering devolved letters of credit) was only around Rs 2 crore, lower than the interest obligations towards the NCDs.

SIL said it is not agreeable to the above downgrading by Ind-Ra and would make a representation to the appropriate authority to review \ revise the said credit rating.

“The said downgrading is effected by credit rating agency on account of the deferment of payment interest, even though the same has been done with the consent of the Debenture Trustee on Debentures which are privately placed.

“Actually, there was no failure on the part of company in respect of payment obligation as the Debenture Trustee has granted consent for deferment of payment of interest,” per its regulatory filing.

Incorporated in 1985, SIL has a grinding capacity of 6.1 million metric tonnes per annum and a clinker capacity of 6.6 million metric tonnes per annum. It also has a 130 MW captive thermal power plant, captive mines, a water desalination facility, and a captive port in Kutch, which can handle 1mmtpa of cargo.

SIL sells ordinary portland cement, portland pozzolana cement and portland slag cement in Gujarat, Rajasthan, Maharashtra and Kerala, and the international markets of West Asia, Africa and the Indian sub-continent.

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