Hero Electric faces rating cut on loan defaults
Hero Electric Vehicles Private Ltd has been downgraded after the company defaulted on its loans as it faces a liquidity crunch with over ₹500 crore of FAME-II subsidies withheld by the government. Credit ratings agency Crisil on Monday downgraded Hero Electric's long term and short-term ratings to Crisil D from Crisil B and Crisil A4, respectively.
«The rating action reflects a delay in servicing of debt obligations due to poor liquidity,» Crisil said in its note. There has been a sharp deterioration in the financial risk profile of the company, Crisil noted, due to continued operating losses, stretch in liquidity due to buildup of subsidy receivables and lower-than-expected equity infusion from external investors.
«Banks don't take kindly to money stuck with the government. In our case, over ₹570 crore in subsidies was passed on by us to the customers through an approved and accepted process mandated by Ministry of Heavy Industries, which has not been reimbursed for almost 24 months.
This situation naturally leads to downgrade of ratings and can affect all companies that focus solely on pure play electric mobility, unlike others that have diverse business lines,» a Hero Electric spokesperson said over email. Once the largest manufacturer of electric two-wheelers in India, the company was a receiver of subsidies under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India Phase-II (FAME-II) scheme.
Under the scheme, companies sell vehicles to customers at subsidised prices and are later reimbursed by the government. The FAME-II subsidies came with the caveat of applicant companies adhering to a phased manufacturing plan (PMP) that sought a gradual increase in local sourcing of parts.
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