Sintex Industries defaults on NCD payments worth Rs 86 crore

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Mumbai: A day after a rating downgrade by CARE Ratings, Sintex Industries said in an exchange filing on Wednesday that it has defaulted in paying interest on 7-year 10.70% secured non-convertible debentures (NCD) worth Rs 86 crore.

According to the company’s filings with the Registrar of Companies, the investors include Union bank, Axis bank, Vijaya bank and State Bank of India and another three banks. Sintex raised a total of Rs 112.5 crore from these investors.

On Monday, CARE Ratings downgraded the company to “issuer non-cooperating” category as it had failed to provide information for monitoring of the rating and also had not paid the surveillance fees for the rating exercise.

The default by Sintex follows the company’s reporting a massive fall in its profit to ₹21.5 crore in the fiscal ended 31 March, 2019 from ₹141.8 crore in the same period a year ago. Sintex’s net debt also increased to ₹5,871 crore in FY19, from ₹5,294 crore in FY18.

“The industry is facing turbulent scenario, with a glut in overseas markets coupled with US China trade war, the realisation in the domestic markets too has shrunk for the quarter under review resulting in a hit on the EBITDA margins. It will gradually improve as the industry stabilises and the trade war subsides,” said Amit Patel, group managing director in a 22 May filing with the stock exchanges.

According to media reports, the filing added that Sintex’s board has approved the divestment of up to 24.99% stake in its subsidiary, BVM overseas, for the purpose of raising long term working capital requirement.

“The outlook on the rating is negative on the expectation that Sintex Industry Ltd’s debt coverage and liquidity indicators would worsen further on the back of high debt repayment obligations in the near-term especially in the light of elevated raw cotton prices and competitive cotton yarn market which is likely to exert pressure on its profitability margins and cash flows going forward,” said the ratings agency CARE.

The company’s debt coverage indicators during FY19 remained weak due to lower than envisaged total operating income and net loss incurred during the fourth quarter. CARE believes that continued high proportion of pledge of promoters’ shares in SIL has reduced the financial flexibility of the promoter group.