HCC soars after CARE Ratings upgrades rating to 'B+' from 'D'

Hindustan Construction Company (HCC) jumped 4.98% to Rs 21.10 after CARE Ratings revised the ratings of bank facilities of the company to 'CARE B+; Stable' from 'CARE D'.

CARE Ratings said that the revision in ratings factor in successful implementation of debt resolution plan (RP) with subsequent regularization of debt servicing. CARE Ratings expect the liquidity position to improve with debt reduction in books of HCC as well as benefits accruing with extended repayment tenor for the optionally convertible debentures (OCD) and non-convertible debenture (NCD) which is likely to provide support to cashflows.

The debt reduction and corresponding interest cost decrease is expected to improve the profitability. The company is also at advanced stage of asset monetization which would support the cashflows. Any deviation from the likely timelines would be a key monitorable.

The ratings also factor in satisfactory order book position which provides a long term revenue visibility and established track record of the company in the construction business.

The rating strengths are however tempered by the elongated working capital with extended collection days and working capital gap with absence of working capital lines thereby resulting in dependence upon mobilization advances and creditors funding.

HCC is one of the largest construction companies in India, engaged in construction activities which include roads, bridges, ports, power stations, water supply and irrigation projects. The company's construction capabilities include solutions for construction of projects in various complex industries including hydel power, water solution systems, nuclear power and process plants and transportation.

The company's consolidated net profit surged to Rs 319.03 crore in the quarter ended September 2022 as against Rs 139.23 crore during the previous quarter ended September 2021. Sales declined 9.97% to Rs 2498.78 crore in Q2 FY23 over Q2 FY22.

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