Salasar Techno Engineering Limited sees a credit rating action

The available rating notice does not state a numerical trigger—such as working-capital intensity above a specified level or liquidity coverage below a specified multiple. It records that Infomerics reaffirmed the ratings but placed them on Rating Watch with Negative Implications, after reviewing FY2026 and Q1 FY27 operating and financial performance. ^{[1] [2]}

Alignment with the latest quarterly metrics

The reported 135.10 receivable days and 127.20 inventory days are consistent with a working-capital-intensive operating model: cash remains tied up for a long period in both customer receivables and stock. The slight sequential deterioration reinforces the direction of the rating agency’s concern, although the disclosure does not establish that any specific agency threshold was breached.

Liquidity indicators also point to tighter coverage: the consolidated current ratio was 1.16x, while TTM interest coverage declined to 1.56x. These are company-reported indicators, not the rating agency’s stated “liquidity coverage” trigger; the two concepts should not be treated as identical. The key limitation is therefore that the exact Infomerics thresholds or trigger wording cannot be verified from the disclosed rationale, but the latest operating metrics are directionally consistent with heightened working-capital and liquidity risk.

The bank facilities under Rating Watch with Negative Implications total Rs 831.73 Crores. This covers both long-term and short-term facilities rated `IVR A/RWNI` and `IVR A1/RWNI`, respectively ^[2].

A weighted average cost of debt cannot be calculated for these specific facilities because the rating annexure does not provide coupon rates or IRRs; those fields are blank or marked “-” across the facility schedule ^[7]. The Rs 831.73 Crores also includes proposed facilities, including Rs 80 Crores of proposed cash credit and Rs 75 Crores of proposed bank guarantees ^[8].

The latest reported annual consolidated interest coverage ratio was 1.72x in FY26, down from 1.94x in FY25 ^[9]. Therefore:

• Rating-watch facilities: Rs 831.73 Crores
• Weighted average cost of debt: Not calculable from disclosed facility-level rates
• FY26 consolidated interest coverage: 1.72x ^[9]

The comparison is consequently directional rather than numerical: the company’s FY26 operating earnings covered reported interest expense 1.72 times, but the absence of facility-wise pricing prevents determining whether the rating-watch debt is priced above or below the company-wide effective borrowing cost.

Salasar is the most leveraged company in the comparison set on a TTM basis. Its latest reported consolidated Net Debt-to-EBITDA was 3.56x in Q1 FY27, versus 2.21x for KANORICHEM and below 1x or net cash for the other named peers. The latest-quarter ratio was much higher at 16.15x, but that is a quarterly snapshot and is less representative than the TTM measure. ^{[10] [11]}

Net Debt-to-EBITDA comparison

Peer read:

• Salasar: TTM leverage of 3.56x is elevated and materially above the rest of the group. Its consolidated net debt was Rs 410.89 Crores at the latest reported balance-sheet date. ^[22]
• Kanoria Chemicals: The closest higher-leverage comparator, at 2.21x TTM consolidated Net Debt-to-EBITDA. ^[13]
• Forbes, Danlaw and Rajoo: Low leverage, with TTM ratios between 0.10x and 0.20x on the reported bases. ^{[15] [17] [19]}
• Kalyani: Negative TTM leverage indicates net cash rather than net debt on the reported standalone basis. ^[21]

The comparison is directional rather than fully like-for-like: Salasar and Kanoria are shown on a consolidated basis, while Forbes, Danlaw and Kalyani are standalone; the latest periods also differ for two peers. On a standalone basis, Salasar’s TTM ratio was still high at 3.23x, versus 1.63x for Kanoria Chemicals and negative or sub-0.1x readings for the lower-leverage peers. ^{[23] [24] [15] [17] [25]}

Covenant breaches or lender renegotiations

No specific covenant breach, waiver, covenant reset, restructuring, or lender renegotiation has been disclosed in the rating-update material. Infomerics reaffirmed Salasar’s ratings at IVR A for long-term facilities and IVR A1 for short-term facilities, but placed both on Rating Watch with Negative Implications; the rated bank facilities totalled Rs 831.73 Crores. ^{[1] [2]}

The disclosed actions are:

• Continued rating surveillance and a requirement to submit monthly No Default Statements and quarterly operating/financial data to Infomerics. ^[26]
• Detailed listing of existing lenders and facilities, including cash-credit, term-loan, bank-guarantee and letter-of-credit limits. ^[7]
• Proposed additional cash-credit and bank-guarantee facilities totalling Rs 155 Crores, also carrying the RWNI rating notation. ^[8]

Those are monitoring and facility disclosures, not evidence of a negotiated covenant relaxation or breach cure. The key unresolved issue is therefore not a disclosed covenant event, but whether the negative rating watch leads to tighter lender terms, higher borrowing costs, or restrictions on incremental working-capital and guarantee lines.