In more troubles for the crippled IL&FS group, India Ratings Tuesday downgraded the long-term issuer rating of a group company, IL&FS Environmental Infrastructure, and Services (IEISL), and placed its ratings under watch.
The agency has also downgraded the ratings of various debt instruments to 'BB'. Rival rating agency Icra had last month junked the ratings of most of the group companies. The downgrade by India Ratings reflects a similar rating action on its parent IL&FS following the default on repayment of commercial papers.
Monday, IL&FS Financial Services defaulted on interest payments of commercial papers, which were due on that day. On September 14, IL&FS, which is unbaled to service most of it's over Rs 91,000 crore debt, had defaulted on an Rs 105-core CP redemption.
The parent's liquidity tightness poses challenges to IEISL in meeting its immediate debt liabilities, it said, adding the possibility of the rollover of its borrowings has diminished significantly in the short term.
Although IL&FS plans to raise about Rs 8,000 crore in equity and debt, and monetize some assets, the timeliness of the debt and equity raising and proceeds from the divestment is critical, the rating agency said.
It said IL&FS would require immediate liquidity support to honor its debt obligations in a timely manner.
IEISL also plans to raise equity of Rs 238 crore through rights issue to part pay IL&FS' debt. IEISL is into waste processing business and is of strategic importance to IL&FS to serve its social objectives.