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Care Ratings concerned about Bombay Dyeing’s ability to service Rs 3597 crore debt

Care Ratings has raised concerns over Bombay Dyeing & Manufacturing’s ability to service its debt during fiscal years 2024 and 2025 which is caused due to the delays in raising Rs 940 crore through rights issues and asset monetisation.

The Wadia group company with business interests in textile, real estate and aviation, has scheduled debt repayment of Rs 3597 crore between FY 24 and FY25.

Care downgraded Bombay Dyeing’s long-term and short-term debt facilities by one notch to BBB- and A3, respectively, while the outlook was revised from stable to negative on Monday.

The company has scheduled payments of Rs 942 crore in FY24 and Rs 2655 crore in FY25 (including group debt). The total outstanding debt ‘remains high’ at Rs 3642 crore as on March 31,2023, according to Care Ratings.

Bank of Baroda has provided Rs 500 crore debt facilities, while Deutsche Bank’s is Rs 2299 crore and ICICI Bank has Rs 56 crore term loan, according to the rating report dated May 15.

The development comes amidst a legal battle that the Wadia group is fighting with lessors to admit its group company Go First Airlines for voluntary liquidation. While the National Company Law Tribunal has approved it, lessors have opposed the move at the appellate tribunal.

On Bombay Dyeing, Care Ratings has stated that ‘repayments in FY24 are tightly matched with expected cash flows and available liquidity whereas FY25 repayments needs to be refinanced if the company is not able to raise funds through rights issue and asset monetisation.’Bombay Dyeing management has conveyed to the rating company that if there is an unanticipated delay in the rights issue and planned monetization, it has receivables from sold flats, expected cash flows from sales of balance inventory, lease rentals, and liquid investments in the form of equity shares held in Wadia group companies for servicing debt repayments in FY24.

“However, these resources continue to remain inadequate over the long-term debt horizon, necessitating Bombay Dyeing to resort to alternative avenues to support debt repayment, especially for FY25,” Care Ratings stated.

In FY23, the company reported Rs 517 crore losses ‘due to continued high interest and inventory write down in the real estate segment in Q4FY23,’ Care stated. The promoters sold shares of group company Bombay Burmah & National Peroxide and infused money in the form of inter-corporate deposits. It holds shares worth Rs 194 of Bombay Burmah as on March 31, 2023 as against RS 367 crore a year ago.

The company’s rights issue was originally scheduled to complete by end March 2023 however, it has not received approval from the market regulator, Securities and Exchange Board of India (Sebi).

In October last year, Sebi barred the company from accessing the capital market alleging faulty interpretation of accounting standards. Securities Appellate Tribunal has stayed Sebi’s order following an appeal by the company.

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