Simplex Infra: NCD interest repayment blues

The share price of Simplex Infra has slumped almost 30% in the last one month ever since the credit rating agencies downgraded the company’s rating reflecting weak finance and outstanding debtors adding to liquidity concerns.

According to a media report, the company has defaulted on payment of NCDs interest worth Rs 4.85 crore which was due on December 26.

This default was due to the temporary liquidity crisis.

Feeling the heat from rating downgrades were Simplex investors.

HDFC AMC has written down its debt scheme exposure of Rs 124.11 crore in Secured Non-Convertible Debentures of Simplex Infra, to Rs 106.25 crore on November 26 after the NCD rating was downgraded by CARE Ratings, with a negative outlook.

Established in 1924, Simplex is a Kolkata-based construction company primarily engaged in Engineering Procurement Construction contracts and turnkey projects related to civil construction across sectors.

For the six months ended September 2019, the company reported revenues of Rs 2,485 crore, operating profit of Rs 330 crore and a net profit of Rs 28 crore.

In order to improve its liquidity position, Simplex plans to induct a strategic partner, who is likely to infuse funds into the company.

Additionally, Simplex is looking to monetize its shareholding in a road special purpose vehicle in the near term.

Net net we believe that liquidity crunch has impacted the near term prospects of the company and it is likely that we could see financials getting a hit

While the company is considering some value unlocking from its SPV assets this may take a long time to materialize which may put pressure on near term earnings for Simplex Infra

Hence investors here could see some weakness in its business prospects in the near term.

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