Ambuja Cements may repay Penna’s debt – ET Infra


MUMBAI: Private credit funds including Edelweiss Alternative Asset expect Ambuja Cements to repay ahead of schedule Penna Cement’s debt that is costing more than 15% per annum. Adani Group-controlled Ambuja Cements last week announced the acquisition of Penna Cement for ₹10,442 crore, including debt.

The group will repay Penna’s existing high-cost debt, including those from private credit funds, company informed analysts after announcement.

With Adani’s backing, lenders expect Penna to look to reduce cost and refinance or repay ₹6,600 crore term loans and ₹400 crore of high-cost debt from Edelweiss it took a few months ago.

The acquisition will help reduce borrowing costs, as ratings firms are expected to upgrade Penna Cement’s credit rating to AAA after the deal from BBB-minus.

Penna Cement had issued around ₹400 crore secured non-convertible debentures with a 15% coupon to Edelweiss Alternative in March, maturing in three years. The acquisition has led to private credit funds like Edelweiss getting early exits. The company has fund-based working capital of ₹2,350 crore, a non-fund-based working capital limit of ₹3,150 crore as well as a term loan of ₹6,629 crore maturing in September 2027, according to an India Ratings report. During an investor call, the Adani Group mentioned that it would repay the existing debt of Penna, said an Adani spokesperson.

“We believe Ambuja Cements has the potential to achieve a turnaround at Penna similar to what was achieved at Sanghi Industries, whose credit rating improved from ‘D’ to ‘AA’ post-acquisition,” said Nuvama Institutional Equities in a report.

Penna’s liquidity profile was stretched, and it had been depending on promoter infusions to meet debt service obligations, leading to a debt service coverage ratio below 1x, according to an India Ratings report. While downgrading Penna’s rating from BBB-plus to BBB-minus, it had cited the company’s scheduled term debt repayment challenges.

  • Published On Jun 17, 2024 at 06:37 AM IST

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