The long term rating for the company is now denoted as [ICRA]A (Stable) and short term rating as [ICRA] A1.
Following the incident that occurred in the ongoing underground construction of East-West Metro Corridor of Kolkata Metro Rail Corporation (KMRCL)which is undertaken by ITD -ITD Cem Joint Venture (ITD JV), the rating of ITD Cementation India (ITD) has been placed under watch with developing implications. On 12 February 2020, ITD had informed BSE, that Calcutta High Court vide, its order dated 11 February 2020, has directed KMRCL to start the tunneling work.
Basis this order, ITD JV has restarted the underground works of Kolkata Metro. As on 31 December 2019 out of the total contract value for this project of Rs 1770.35 crore, Rs 484.52 crore is pending. The balance work is estimated to be completed by December 2021 as against original completion scheduleof May 2020; the company is in the process of applying for extension of the timeline for the same. ICRA is given to understand that the overall cost overrun (including damages to ITD’s machinery) is estimated to be around Rs 90-Rs 100 crore.
The additional cost will be partly met through contingency reserve available as part of original project costand partly by way of insurance claims. Further, the ITD JV has adequate liquidity cushion with unencumbered cash of Rs 269 crore as on 31 December 2019 which provides comfort.
Although the execution timelines are impacted, there will not be any material adverse impact on ITD’s financials and thus ICRA has removed the ‘rating watch with developing implication’ and assigned a ‘Stable’ outlook.
Going forward, the company’s ability to sustain the operating margins while improving its working capital cycle and faster ramp up in execution across its large orders will remain critical from a credit perspective, ICRA concluded.
ITD is engaged in providing design, engineering, procurement and construction (EPC) services for infrastructure projects in the country. It has done variety of work which includes piling, foundations, ground improvement, geotechnical & specialist engineering, marine structures and ports; transportation projects including highways and bridges; hydroelectric projects including tunnels and dams; industrial works and urban infrastructure projects. ITD is a part of Thailand-based Italian-Thai Development Public Company (ITD Thai) group.
