India Ratings and Research (Ind-Ra) has downgraded Dredging Corporation of India (DCI) Long-Term Issuer Rating to ‘IND BBB+’ from ‘IND A’. The Outlook is Negative.
According to the rationale report, the downgrade and Negative Outlook reflects the weakening of DCI’s liquidity position in FY21 due to weak operating performance and a substantial increase in creditors in 2HFY21 and expectations of moderate profitability.
During FY21, the company reported operating loss on account of increase in the operating expenses as well as due to a decline in the subcontracting margin, as a result of which the company incurred cash loss.
Despite the cash loss, the company reduced its overall debt predominantly on the back of substantial increase in the creditors. Its liquidity has been largely supported by increase in the creditors.
Ind-Ra said that liquidity of the company is likely to remain stretched in view of expectations of moderate profitability due to decline in subcontracting margins and substantial debt repayment in FY22-FY23.