Liquidity is marked by tightly matched accruals to repayment obligations, highly utilised bank limits and modest cash balance.
Mumbai: The following are the new liquidity indicators the credit rating agencies have to provide along with their rating reports for the end-users’ benefit:
Superior/ Strong: Liquidity is marked by strong accruals against negligible repayment obligations and liquid investments to the tune of Rs.xxx crore. With a gearing of xx times as of March 31, xxxx, the issuer has sufficient gearing headroom, to raise additional debt for its capex. Its unutilised bank lines are more than adequate to meet its incremental working capital needs over the next one year.
Adequate: Liquidity characterised by sufficient cushion in accruals vis-à-vis repayment obligations and moderate cash balance of Rs.xx crore. Its capex requirements are modular and expected to be funded using debt of Rs.xx crore for which it has sufficient headroom. Its bank limits are utilised to the extent of 80 per cent and has sought enhancement in bank lines, supported by above unity current ratio.
Stretched: Liquidity is marked by tightly matched accruals to repayment obligations, highly utilised bank limits and modest cash balance.
Poor: Liquidity is marked by lower accruals when compared to repayment obligations, fully utilised bank limits and modest cash balance. This could constrain the ability of the company to repay is debt obligations on a timely basis.