The company, however, remains positive and has said that it will raise Rs 688 crore (Rs 6.88 billion) over the next two months.
The rating agency has also downgraded ABG's Rs 200 crore (Rs 2 billion) non-convertible debenture programme to 'IND BBB'. India Ratings said, "The ratings are based on a consolidated view of ABG Shipyard and its subsidiaries.
"The downgrade reflects ABG Shipyard's continued strained liquidity position due to its delays in executing a novation agreement with a large client and an associate company."
In an emailed response, Dhananjay Datar, group CFO and executive director, ABG Shipyard, said, "Small delays are mostly on account of the financial arrangements at the client end.
"These delays are mutually agreed as all our clients are repeat customers and enjoy a carefree and cordial relationship.
"However, overall the company's liquidity position is normal."
He added that with the current economic slowdown worldwide, ABG is experiencing "a temporary cash flow mismatch".
The company has total order book of Rs 18,000 crore (Rs 180 billion), out of which the unexecuted order book is about Rs 9,500 crore (Rs 95 billion), which would take care of the execution/revenues for the next three to four years.
"Further, the company is now focusing on execution of offshore vessels out of the existing order book, which would entail the regular milestone payments to the company," said Datar.
India Ratings, too, noted this and said, "The company has traditionally manufactured small- to mid-size vessels for which the demand has been less cyclical, compared with the demand for large-size vessels."
ABG Shipyard has two manufacturing facilities in Surat and Dahej in Gujarat.
Its revenues increased from Rs 2,133 crore (Rs 21.33 billion) in FY11 to Rs 2,472 crore (Rs 24.72 billion) in FY12.
The earnings before interest, taxes, depreciation, and amortisation margins also improved marginally from 27.3 per cent to 28.3
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