Mumbai: JMT Auto Ltd, an Amtek group company, has been downgraded by rating agency Crisil on concerns of deteriorating financials and limited ability of the parent firm to support the company.
The rating of JMT has been downgraded two notches to BBB- from BBB+ earlier. The rating has also been placed on ‘rating watch with negative implications,’ the rating agency said in a statement on Monday.
The rating action is based only on publicly available information as JMT has not cooperated with Crisil in its surveillance process, it said.
On 7 August, CARE Ratings suspended its rating on parent company Amtek Auto citing lack of information.
Commenting on JMT’s rating downgrade, Crisil noted that the company’s credit risk profile is marked by considerable de-growth in its revenue and profitability in the first quarter of fiscal 2015-16 on account of decline in the domestic sales. The rating agency believes JMT’s credit risk profile will continue to be constrained over the medium term driven by a slowdown in domestic demand from the auto industry, it said.
The rating downgrade also reflects Crisil’s belief that JMT’s financial flexibility would be impacted substantially following a significant deterioration in its majority shareholder (holds 70.74% stake) Amtek Auto Ltd’s credit risk profile, Crisil added.
“JMTL, in addition to strong technical support, had anticipated significant financial support from AAL post the acquisition. However in contrast, AAL has seen a sharp deterioration in its own liquidity position and has posted PAT (profit after tax) loss of Rs1,460 million in the three month period ending June 2015 (Q3FY15),” said Crisil.
JMT Auto’s shares fell 4.96% to Rs60.40 at 2:40 pm on Monday and Amtek Auto fell 9.77% to Rs29.55. while the benchmark Sensex dropped 0.76%.
Amtek Auto Ltd will need to pay Rs800 crore to investors in the next two weeks, when bonds sold by the company in 2010 mature, and concern is mounting among bankers and bondholders that the debt-laden auto parts maker, which reported a surprise June quarter loss, may default, Mint reported on Monday.
The Delhi-based company had sold the bonds at a coupon rate of 10.25%, its largest such sale in the local market. These bonds are coming up for redemption on 20 September, according to data from Bloomberg. Axis Bank Ltd managed the bond sale.
