BHEL down on Crisil downgrade

BHEL has slipped over 1.5% intra day to Rs.105 levels and continues to remain at the same levels. Its 52-week low stands at Rs.90.40.

The company informed the stock exchanges yesterday that ratings agency CRISIL downgraded its rating on the long-term bank facilities of the company to CRISIL AA+/Negative from CRISIL AAA/Negative. The downgrade reflects CRISIL's belief that Bhel's business risk profile will remain constrained over the medium term by continued weak profitability and stretch in working capital cycle.

CRISIL has stated in the report that pacity utilization, competitive pressures and higher material costs continue to weigh on profitability of BHEL, which reported operating loss of R2,322 crore for 9MFY16, which was more than expected.

The rating agency anticipates profitability of BHEL to remain under pressure over the near to medium term given the difficult market condition and intense competition. It stated that a slowdown in order execution, has led to stretched receivables of R32,000 to R40,000 crore. This has resulted into sizeable working capital requirement over the last four years and this pressure may continue over the medium-term.