India Ratings and Research (Ind-Ra) has placed Shree Renuka Sugars Limited's (SRSL) Long-Term Issuer Rating of 'IND BBB+' on Rating Watch Negative (RWN).
The RWN reflects the persisting uncertainty over the timeframe of resolution of the issue of reclassification of SRSL's account as a non-performing asset (NPA) by its lenders; although this has not had an immediate impact on the company, it could potentially affect SRSL's financial flexibility if unresolved for a longer period.
The re-classification by some of the banks in March 2019 has not impacted the company's liquidity so far, as it continues to receive support from its parent Wilmar Group (Wilmar), (ultimate holding company: Wilmar International Limited) (FY19: INR9.9 billion), in line with Ind-Ra's expectations. However, if the issue is not resolved, Ind-Ra believes it could eventually impact SRSL's financial flexibility due to the company's impaired ability to tie-up additional external funding, as most of its existing lenders have classified the account as NPA in the past five months. SRSL has been servicing all its debt obligations on due dates since the restructuring was implemented on 31 March 2018 and Ind-Ra derives comfort from the assurance given by Wilmar's management's that SRSL remains a strategically important entity for them, and that they would continue to offer financial and operational support to the company in the future.
According to SRSL's lenders a communication was received from the Reserve Bank of India (RBI) with regard to a change in ownership as considered in the resolution plan, suggesting that the former should give consequential effect of the disqualification of the acquirer, as Wilmar was technically a co-promoter prior to the restructuring.
As per the prudential framework for the resolution of stressed assets released by the RBI in June 2019, a restructured account can be upgraded to standard only after at least 10% of the outstanding principal debt as per the resolution plan has been paid and one year has passed from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with the longest period of moratorium. While discussions are on to resolve the asset classification issue, clarity on the outcome is awaited and remains a key monitorable.
Shares of SHREE RENUKA SUGARS LTD. was last trading in BSE at Rs.6.94 as compared to the previous close of Rs. 6.93. The total number of shares traded during the day was 63186 in over 96 trades.
The stock hit an intraday high of Rs. 7.06 and intraday low of 6.72. The net turnover during the day was Rs. 433421.