Crisil downgrades Hero Electric's rating due to delay in servicing of debt obligations

livemint.com:

CRISIL Ratings has removed its ratings on the bank facilities of Hero Electric Vehicles Private Limited (HEVPL) from 'Rating Watch with Negative Implications' and has downgraded the ratings to ‘CRISIL D/CRISIL D’ from ‘CRISIL B/CRISIL A4’. The rating action reflects a delay in servicing of debt obligations due to poor liquidity. There has been a sharp deterioration in the financial risk profile due to continued operating losses, stretch in liquidity due to buildup of subsidy receivables and lower than expected equity infusion from external investors.

CRISIL Ratings notes that there are ongoing investigations by relevant authorities against various industry players, including HEVPL. The company had received a notice from The Ministry of Heavy Industries for demand of subsidy availed by company of ~ ₹133 crore till date). This matter concerns the allegations against players of not meeting the eligibility norms for availing the FAME (Faster Adoption and Manufacturing of Electric Vehicles) 2 subsidy, such as required localisation of components.

This led to a build-up of subsidy receivables, which increased to around ₹516 crore as on March 31, 2023, from ₹62 crore a year ago, constraining liquidity. The ratings also factor in the weak operating performance owing to operating loss, stretched liquidity leading to reliance on external funding and high capital requirement for expansion plans. These strengths are offset by the established brand of HEVPL, backed by the extensive experience of its promoters and the high growth potential of the domestic electric two-wheeler (E2W) industry.