With Mangalore Urban Development Authority (MUDA) due for a review of its credit rating, it seems unlikely that it will shake off the “bad investment and likely to default on loans” tag it received last time around.

ICRA (formerly Investment Information and Credit Rating Agency of India Limited), which assesses the risks, performance and capabilities of a company in repaying loans, had assigned the ‘D’ rating, which is the lowest of the category, to MUDA for long-term loans during its audit done in March 2012. The agency explains the rating as companies that “are in default or are expected to be in default soon.”

The Reserve Bank of India regulations dictate that companies must get rated every 15 months. “A review is to be done soon, but the data has not come in full. A new rating will be calculated within the end of the year. Until then, financiers will consider this rating,” said Jayanta Chatterjee, Relationship Manager for ICRA.

On the importance of the rating, Mr. Chatterjee said banks and financiers checked the ratings before giving loans. “If the rating is bad, financiers may increase interest rates to cut risk,” he said.

However, as an officer in the accounts department of MUDA told The Hindu, nothing much has changed since the last audit, and there is a possibility a ‘D’ might show up in its report card again.

In its 2012 rating, MUDA suffered as it missed due dates on the Rs. 137.44 crore loans taken. Rs. 11.95 crore was still outstanding when the rating was given. “The cash flows do not match obligations,” said Mr. Chatterjee. While, the public sector enterprise posted a loss of Rs. 19 lakh in 2010-11, it had meagre profits of Rs. 1 lakh and Rs. 2 lakh in the two years before that.

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While Mangalore Electricity Supply Company Limited (Mescom) slipped in the ICRA ratings, Mangalore Refinery and Petrochemicals Limited (MRPL) is seen as a good investment.

Mescom has received BBB+ (stable rating) for their long-term loan commitments, said an ICRA December 2012 report. However, this is a slip from the ‘A-’ rating received in March 2010.

Due to ONGC’s commitment to MRPL, and its “high financial flexibility”, the refinery has retained its AAA and A1 (both being the highest ratings awarded) for long-term funds and short-term funds respectively.

For Mangalore Special Economic Zone, the long-term rating is BBB+. While the potential of MSEZ is high, said the agency, tax-benefits, construction delays, water supply induce risk.

Nothing much has changed since the last audit, and there is a possibility a ‘D’ might show up in its report card again

An accounts officer

MUDA

The cash flows do not match obligations…A new rating will be calculated within the end of the year

Jayanta Chatterjee

Relationship Manager, ICRA

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