From Rs 1 lakh to Rs 1300! How this stock eroded 98% investor wealth in just 1 year

The company first defaulted on commercial papers (CPs) worth Rs 150 crore occurred on June 2019, since then, the defaults have been a recurring occurrence. It defaulted on its repayment obligations five times till July 15. The second default was on commercial papers worth Rs 50 crore on June 28, while the latest one was on commercial papers worth Rs 174 crore on July 25.

On July 15, the company defaulted in paying interest of over Rs 41 lakh on secured redeemable non-convertible bonds (NCDs) worth Rs 50 crore. It further defaulted on unsecured commercial papers worth Rs 45 crore on July 16.

Post the first default, CARE Ratings downgraded ratings of the company, saying "the rating strengths are tempered by exposure of the company's travel business to macro-economic factors prevailing in the markets to which it caters and the fragmented nature of the domestic travel industry. The timeliness, adequacy of the asset monetisation and the subsequent reduction in debt remains the key rating monitorable".

Later Brickwork Ratings also downgraded the rating of the company's NCDs of Rs 50 crore from BWR AA to BWR AA- with a stable outlook.

Brickwork Ratings in its research report said, " The rating downgrades factors increase in receivables resulting in tied up of working capital and its recent divestment limiting the profitability growth. The rating is also constrained on account of continued high levels of pledge shares by the promoters and low market capitalization."

The company recently announced that it won't be able to declare its financial results for the quarter ended June 30 and is in the midst of finalising a resolution plan to resurrect the company. The company also got a 180-day breather from lenders to finalise a resolution plan. In a statement, it said, "the company is in the process of submitting its draft resolution plan to the lenders. It is also working on various other monetisation initiatives to address its liquidity issues.

The pledge on promoters’ stake has only increased in the last 3 quarters. As of June 2019, the promoters have pledged 69.3 percent of their shares as compared to 63.3 percent in March 2019, and 62.6 percent in June 2018.

In July, the travel company’s license was also suspended by the International Air Transport Association (IATA). In its press release, the company said,” Kindly be informed that lATA has suspended its license for selling tickets. However, the Company will continue to issue tickets on cash and carry basis.”