Reliance Infrastructure responds to downgrade by India Ratings

Reliance Infrastructure said it disagreed with the decision by India Ratings, a unit of Fitch, to downgrade its debt over delays in equity infusion and monetization of assets.

“The Company respectfully disagrees with the views of India Ratings,” it said today.

“The Company has taken series of steps for asset monetization including inter alia filing Offer Document for divestment of Roads business through InvIT, continuing discussion for divestment of its Mumbai Power Business and divestment of Transmission business,” it said.

“Moreover, the Company has recently won arbitration award of Rs.4,700 crore in relation to the Delhi Airport Metro Express project. These activities will enable the Company to become debt free,” it added.

“The Company believes that India Ratings does not appropriately factor the above measures taken by the Company while assigning the rating.”

The Anil Ambani Group company’s debt was downgraded on Oct 4 over delays in lowering debt levels, and the rating company warned of further cuts in ratings.

“Ind-Ra was expecting R-Infra to raise INR20 billion either through a qualified institutional placement (QIP) or a stake sale in road assets in addition to completing the sale of its power transmission assets to Adani group for INR20 billion by 1HFY18,” said the rating company.

“The agency expects R-Infra to receive proceeds from the sale of transmission assets in 3QFY18. As per management, R-Infra may also raise proceeds from QIP and equity proceeds from the sale of its road assets to InVIT by 3QFY18.

“Any further delay in equity raising could result in a further rating action. The agency has maintained R-Infra’s rating on RWN owing to continued uncertainty regarding the quantum and timing of cash inflows from its asset monetisation efforts and qualified institutional placement,” it added.

It pointed out that Reliance Infrastructure continues to see high debt levels, with net debt at 6.4 times the company’s operating profit (EBITDA) in FY17, largely unchanged from 6.5 times seen in the preceding year.

“A further reduction in gross debt is contingent upon R-Infra’s successful raising of proceeds through QIP or asset monetisation,” it said.

India Ratings also said that it was comfortable with the situation in the company’s power distribution business in Mumbai and the growth seen in the company’s construction order book.

The company faces competition from rivals such as Tata Power in Mumbai.

“The revised tariff plan of R-Infra for the control period FY17-FY20 for high-end consumers is competitive compared to the peers’ in the same distribution region,” India Ratings said in its note issued on Oct 4.