Moody's downgrades Lodha Developer's ratings

Mumbai: The corporate family rating of city-based realty firm Lodha Developers(LDPL) has been downgraded by global ratings agency Moody's Investors Service to B2 from B1, citing reasons of weak liquidity position and high refinancing risk for such rating.

It has also downgraded the senior unsecured debt rating of the US dollar denominated bonds issued by Lodha Developers International Ltd and guaranteed by Lodha Group to B2 from B1 and has given a negative outlook for the rating.

"The downgrade reflects our expectation that the operating environment for the Indian real estate sector will continue to remain weak post the demonetisation exercise that took place in November 2016. Weak operating conditions will continue to pressure the company's sales performance over the next 12-18 months," Moody's Assistant Vice-President and Analyst Saranga Ranasinghe said in a statement here.

As a result, Lodha's financial profile will no longer be consistent with the previous B1 corporate family rating, he said.

The negative outlook reflects the high refinancing risk, weak liquidity position and the challenging operating environment for real estate companies in India, the agency said.

"Sales volumes in the Indian residential market decreased by more than 40 per cent in fourth quarter of 2016 compared to the same period in 2015. As such, we expect LDPL's operating sales to be 15-20 per cent lower than Moody's previous expectations of around Rs 7000 crore for this fiscal year," it noted.

Moody's further observed that operating sales over the next 12-18 months will remain at levels that will be substantially lower than those that would allow LDPL to generate excess cash flow to pay down debt.

Lodha's debt has continued to increase and stood at Rs 13,300 crore (excluding pro rata debt for the London properties) at the end of fiscal 2016. Increase in borrowings was largely driven by an increase construction spending to Rs 3800-4000 crore in the current year as compared to Rs 2900 crore in the previous year.

With PTI Inputs