Mumbai: Ratings agency Moody’s Investors Service on Thursday revised its outlook on Larsen & Toubro Ltd’s, or L&T, Baa2 issuer rating to negative from stable.
The Baa2 rating continues to reflect L&T’s leading market position, diverse revenue stream, strong order backlog on hand, proven operating track record and sound liquidity position, it said in a statement.
“The change in outlook reflects the increase in L&T’s consolidated debt, which is higher than our previous expectations as a result of the company’s rapid growth plans,” said Ivan Palacios, Moody’s AVP and an analyst, and their lead analyst for L&T. “This increase in debt is evident at L&T’s stand-alone level - because of its large capital expansion program - as well as at its infrastructure development and finance subsidiaries.”
L&T’s consolidated debt has increased from Rs64.3 billion to Rs184 billion over the last two years and, at the same time, group consolidated adjusted debt and Ebitda has risen from 1.7x to 2.9x, Moody’s said in its statement.
The rating could experience downward pressure if L&T’s consolidated financial profile does not improve. In addition, continued strong growth in the infrastructure development and finance businesses is likely to lead to a downgrade, absent further equity injections on a consolidated basis.