Kalyani Steels Ltd.

• Non-convertible debentures - Rs 10 crore Rating: downgraded from BBB+ to D
• Non-convertible debenture - Rs 46.9 crore Rating: downgraded from BBB+ to D

The ‘BBB+’ (pronounced triple B plus) rating assigned to the Rs.10-crore and Rs. 46.9-crore non-convertible debenture programmes of Kalyani Steels Ltd have been downgraded to ‘D’ (pronounced single D). The revised rating indicates that the instrument is in default or is expected to default on maturity.

The rating reflects the inability of the company to meet its debt obligations in a timely manner. This is on account of a timing mismatch between cash inflows from divestment of dominant stake in Kalyani Seamless Metal Tubes Ltd and outflows to meet obligations on debt secured against assets leased to Kalyani Seamless. The divestment of holding and subsequent merger of Kalyani Seamless with Indian Seamless Metal Tubes Ltd is expected to be completed by February - March 2000. The company is exploring the possibility of meeting debt obligations that are currently maturing through short term sources pending cash inflows from the divestment.

The company's operational cash flows are low after sale of its manufacturing facility at Mundhwa into a joint venture company and delays in full commissioning of the Hospet Steel project. Though the company has a high level of investments, the cash flows from these investments are also insufficient to meet its debt obligations. The future prospects of the company depend upon timely completion of the Hospet project, which is now expected to be fully complete by March 2000 against the previously envisaged January 1999.