Bengaluru: Rating agency Icra has downgraded Bengaluru Metropolitan Transport Corp (BMTC) to default due to delays and irregularities in servicing long-term loans by the state-owned public carrier. The agency downgraded its rating on BMTC to default from stable.

“BMTC's financial performance weak in FY2019, characterised by continued losses and the consequent strained liquidity position and inadequate coverage indicators. The stressed cash flows resulted in delays in debt servicing, despite the support received from the Government," Icra said in a statement.

It said losses from operations over the past few years were primarily due to lack of traffic revision amid rising operations cost and reduced passenger load factor.

BMTC fleet utilisation was around 86.7% till June this year, as against 84.1% recorded last year.

“The BMTC’s operating performance continued to remain weak in FY2019 primarily owing to the firm fuel costs against the lack of fare revision and rising employee expenses. Further, the number of profit-making schedules reduced sharply during FY2019, resulting in an operating loss of 4.32 per km during FY2019 as compared to an operating loss of 1.06 per km during FY2019," according to the Icra statement.

Gross revenue has seen only marginal increase in recent times. According to BMTC, gross revenues stood at Rs530 crore as of June 2019 compared with 2293 crore last year, while cost of operations was at Rs618 crores during the period as against 2,642 crore last year.

Icra said cash losses incurred increased BMTC’s dependence on grants from the Karnataka government and external borrowings for funding its fleet expansion programme and rising operating expenses. “The ongoing capital expenditure towards strengthening its fleet is likely to limit the improvement in the leverage ratios and liquidity of the BMTC in FY2020," the agency said.

It added that timely financial support and additions to its fleet will be “critical" for improvement in its overall financial profile going forward.