The long-term rating downgrade takes into account the muted sales and a sustained increase in input costs, which led to weak performance at the groups real estate portfolio and slower-than-anticipated progress on asset monetisation, the rating company said.
Furthermore, the funding support provided to group/subsidiary companies (primarily real estate special purpose vehicles) has resulted in an increase in SPCPLs standalone borrowing levels, contrary to ICRAs expectations of a reduction.
The ratings have been placed on watch with developing implications as ICRA would closely monitor the progress achieved by the company on deleveraging plans through equity infusion, asset monetisation, and internal accruals.
Debt availed by various SP group real estate entities for which SPCPL has extended debt service reserve account (DSRA) guarantee is exposed to refinancing risks, given that the projects would take time to generate commensurate cash flows.
As on March 31, 2018, SPCPL had total contingent liabilities of Rs 3,692 crore, of which Rs 1,927 crore were toward financial guarantees and the remaining Rs 1,765 crore toward performance guarantees.