S&P downgrades UPL to junk

S&P said it lowered UPL Corp. and its senior unsecured notes to BB+ from BBB- and its perpetual securities to BB- from BB.

“The company's off-balance-sheet receivables sharply increased to Indian rupee (Rs.) 121 billion as of March 2022, an about 60% year-on-year growth. The company's credit metrics have therefore weakened, despite a notable operational growth in fiscal 2022 (year ended March 31, 2022). Contrary to our expectation of a reduction in debt, UPL's S&P Global Ratings adjusted debt for fiscal 2022 rose to about Rs. 360 billion from Rs. 302 billion a year ago,” the agency said in a press release.

S&P said it considers UPL’s lengthening working capital cycle is a risk, with trade payable days growing to about 270 days from 200 days.

“Our issuer credit rating on UPL is constrained by the company's extended working capital cycle, especially relative to peers', as well as the significant seasonality in UPL's working capital and cash flows. We have not explicitly adjusted the company's debt for the unusually long accounts payable cycle. However, we regard the payables as having debt-like characteristics, given their long cycle of around 270 days as of fiscal 2022,” the agency said.

The outlook is stable.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.