More trouble for Lanco: Crisil downgrades Rs 8000 cr loans

Lanco Power, a subsidiary of Lanco Infratech, is in trouble. An increase in the cost of coal - a key raw material - and delays in receiving payments from PTC India, a client, have prompted ratings agency Crisil to downgrade Rs 8,207 crore worth of long- and short-term loans given to Lanco Power, The Economic Times reported.

The downgrade reflects growing risk of timely repayment of its debt, Crisil said, adding that both higher coal costs and delayed payments have resulted in a sharp increase in working capital for the power producer.

Crisil said Lanco is approaching various banks for more short-term credit as well as started selling power on the power exchange, but is still likely to face intermittent "cash flow mismatches". Hence, the downgrade in the power producer's rating to 'moderate risk' from 'moderate safety'.

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Even as its power problems continue, Lanco Infratech seems to be more confident about the power business than anything else.Sources told PTI it might sell off its road business to concentrate on power. Of course, it plans to focus on hydro power generation compared with thermal power generation, which is currently facing an acute shortage of fuel (coal).

With high debt on its books, Lanco Infratech might even rope in some strategic investors for its power arms and players like 3i, Blackstone and Carlyle have already shown interest in picking up a stake, reported ET earlier.

The company's results have not been impressive this quarter: net profit dropped 39 percent in the fourth quarter of the past year due to high interest cost and low capacity utilisation.