Textile manufacturer Sintex Industries Ltd on Wednesday said that it has defaulted on non-convertible debentures (NCD) worth ₹86 crores, a day after a rating downgrade by CARE Ratings, the company said in an exchange filing.
The company, a major textile and yarn maker, is part of Sintex group, the world’s largest maker of plastic water tanks, which is housed in another listed entity - Sintex Plastics Technology Ltd - after a demerger of Sintex Industries in 2017.
According to the company’s filings with the Registrar of Companies, the investors who subscribed to the seven-year NCD at a coupon rate of 10.7% include Union bank, Axis bank, Vijaya bank and State Bank of India and another three banks. Sintex raised a total of ₹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.
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, which coupled with significant erosion in SIL’s market capitalization has reduced the financial flexibility of the promoter group to support the operations of the company.
Currently, 84% of the promoter shareholding is pledged with different financial institutions.
Last year, Sintex’s Plastics Technology raised ₹1,250 crore from private equity fund KKR India and its affiliates to refinance debt and finance growth in the B2C business in retail plastics and auto and defence plastics. It also planned to use the capital to improve cash flows and augment brand building.
Sintex Plastics too saw its revenue fall to ₹4,774 crore in fiscal 2019, from ₹5,607 crore in the previous year, while profit reduced to ₹94.5 crore from a profit of ₹173.6 crore in the last year.