India Ratings and Research (Ind-Ra) has downgraded Shree Renuka Sugars (SRSL) long-term issuer rating to 'IND BB-' from 'BBB-'. The outlook is negative. The agency has also downgraded SRSL's Rs 2,500 million non-convertible debenture programme to long-term 'BB-' rating with a negative outlook from 'BBB-'.

The downgrade reflects the likelihood of higher-than-expected liquidity concerns post Ind-Ra's further interactions with SRSL's management amid falling global as well as domestic sugar realisations. This, coupled with high production costs, reiterates the agency's view of the company's stressed profitability in FY16. Liquidity stress is further indicated by SRSL's almost-full utilisation of fund-based limits and minimal cash balances.

The negative outlook reflects the agency's expectation of SRSL's projected standalone operating cash flow in FY16 being insufficient to service the scheduled standalone repayments (maturities of long-term loans) of Rs 4.1 billion. Ind-Ra believes the cash flow mismatches will pressurise borrowing costs.

Shares of the company declined Rs 0.11, or 1.17%, to settle at Rs 9.28. The total volume of shares traded was 1,684,548 at the BSE (Tuesday).