ICRA suspends rating on Opto fund-based facilities; shares down

An economic slowdown hits smaller companies first. As the downturn starts crippling the ability to service debt, companies that face rating downgrades are steadily.

In the latest instance, rating agency ICRA has suspended rating assigned to the Rs 538 crore fund-based facilities of Opto Circuits citing the “absence of the requisite information from the company”.

The agency has also cut rating to B from AA- on Rs 538 crore fund-based facilities of the company.

[caption id=“attachment_417748” align=“alignleft” width=“380”] Shares of Opto Circuits were down 4.5 percent at Rs 143.25. Reuters[/caption]

Shares of Opto Circuits were down 4.5 percent at Rs 143.25.

“The rating revision takes into account Opto’s stretched liquidity position on account of continued high working capital intensity in 2011-12 resulting from high receivable period, and significant inventory levels as well as advances to suppliers,” ICRA said.

The high capital expenditure and dividend payout have resulted in negative free cash flows, the rating agency said.

“The stretched liquidity position of Opto is also reflected in its increased working capital borrowings and irregularities in utilisation of its working capital facilities and servicing of its debt obligations,” ICRA said.

It also said the company’s significant capital expenditure plans and squeeze in operating margins after the acquisition of Cardiac Science Corporation have constrained the ratings.

Opto had bought Cardiac Science Corp in Dec 2010 for $64 million. It had earlier made two more minor acquisitions, of which one was Indian company.