Wadias’ twin worries as Care ratings show concerns over Bombay Dyeing and Go First fate hangs in balance

In what could be a double whammy for Wadia Group after its crisis-hit airline carrier Go First filed for voluntary insolvency proceedings, CARE Ratings has raised concerns over Bombay Dyeing’s ability to service its debt during fiscal years 2024 and 2025.

Bombay Dyeing & Manufacturing Company, the flagship company of the Wadia Group, has significant debt repayments due worth ₹3,597 crore between FY24 and FY25, for which the credit rating agency has flagged concerns due to the delays in raising ₹940 crore through rights issues and asset monetisation.

CARE Ratings believes repayments in FY24 are tightly matched with expected cash flows and available liquidity whereas FY25 repayments need to be refinanced if the company is not able to raise funds through rights issue and asset monetisation.

The credit rating agency has cut its ratings on Bombay Dyeing’s Long-term Bank Financing to BBB- and has revised its outlook to Negative.

The rating action factors the delay in completion of rights issue of ₹940 crore and planned asset monetization from the envisaged timelines which was expected to improve liquidity and enable faster deleveraging, CARE Ratings said. The rights issue was expected to be completed by March 31, 2023 subject to receipt of regulatory approvals.

“The revision in ratings assigned to the bank facilities and instruments of the company factors weaker than expected overall business risk and financial profile with widening of cash losses, both for the financial quarter and financial year ended March 31, 2023 resulting in further erosion of the networth and consequent deterioration of debt metrics,” it added.

Also Read: GoFirst crisis: Wadia Group seeking a one-time settlement offer

Bombay Dyeing’s consolidated net loss in the quarter ending March 2023 widened to ₹246.1 crore from a net loss of ₹41.74 crore in the year-ago period. Its consolidated revenue from core operations during the quarter increased 12% to ₹670.17 crore from ₹598.01 crore, YoY.

During FY23, the scheduled debt repayments have continued to be partly supported by promoter infusion (ICD) and sale of shares held by it in group companies. The sale of shares and part of the cash balance being liquidated has consequently resulted in tapering of the liquidity cushion available with the company, the credit rating agency said.

CARE believes that improvement in financial risk profile of the company is likely to happen only after substantial deleveraging which will result from successful implementation of proposed monetization and fund-raising plans in FY24. 

The agency added that it is also closely monitoring the events pertaining to the recent insolvency of Go First Airline held by the group and assessing its impact on the overall risk profile of the Wadia group.

Read here: NCLAT defers verdict on appeal against Go First insolvency; to hear lessor's plea on May 22

The Wadia-group-owned GoFirst airline, the country's fourth largest carrier, filed for bankruptcy due to the financial crisis after it had to grounded about half of its fleet due “faulty” Pratt & Whitney engines. 

The airline was granted bankruptcy protection by NCLT earlier this month, bolstering chances of getting back on its feet. However, lessors have started mounting legal challenges to repossess planes.

The National Company Law Appellate Tribunal (NCLAT) has deferred the matter pertaining to Go First lessors’ petition seeking a stay on a bankruptcy court order allowing voluntary insolvency of the low-cost airline to May 22, according to reports.

At 10:50 am, the shares of Bombay Dyeing & Manufacturing Company were trading 1.02% lower at ₹83.63 apiece on the BSE. 

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