S&P affirms ANI Technologies' 'B-' rating on sufficient liquidity

Rating agency Standard and Poor’s (S&P) has affirmed ANI Technologies Ltd’s (ANI Tech) “B-” speculative grade rating on adequate liquidity.The company, ANI Tech, is the operator of ride-hailing platform OLA Cabs.

India-based ANI Technologies Pte Ltd is scaling back its growth aspirations in loss-making segments to reduce capital requirements. At the same time, the company announced a liability management exercise targeting a buyback of $250 million of its guaranteed senior secured term loan--a move deemed to be opportunistic.

S&P said it expected ANI Tech to have sufficient liquidity for at least the next 24 months to bear operating losses until the company turns profitable. This is after a targeted buyback of its term loan.

The proposed cash tender offer will be a one-off transaction. That said, the buyback of the term loan in about nine months post issuance is unusual and could hit ANI Tech's capital market standing. This is notwithstanding the economic benefits of the transaction, mainly from reduced interest payments.

ANI Tech's pivot in strategy less than 12 months since its term loan B issuance raises risks related to its strategic planning. The company's capital structure will continue to face unhedged currency risk. This is because operations will remain concentrated in India, with a slower growth trajectory in its international mobility segments, S&P said.

ANI Tech's current intent to use its vehicle commerce business to market Ola Electric's two-wheelers rather than used cars also differs from previous expectation that the two entities would be run independently.

The outlook on the instrument is stable. B rating, a speculative grade, indicates the entity is more vulnerable to adverse business, financial and economic conditions, but currently has the capacity to meet financial commitments.

“We view ANI Tech's proposed cash tender offer as opportunistic rather than distressed, despite the potential for a below-par buyback,” the rating agency said.

S&P does not anticipate material risks of a conventional default in the absence of the transaction, given the company's adequate liquidity and limited debt maturities over the next 24 months.

The stable outlook reflects expectation that ANI Tech will have sufficient liquidity over the next 24 months to support its business improvement and growth strategies to achieve profitability by FY24. The outlook also incorporates the view that a potential failure to go public will not result in holders of compulsorily convertible preference shares (CCPS) exiting.