Kotak, Alpic rating lowered

MUMBAI, October 23: The heat is on the Non-Banking Finance Companies (NBFC) sector as the leading credit rating agency, Crisil, has downgra...

MUMBAI, October 23: The heat is on the Non-Banking Finance Companies (NBFC) sector as the leading credit rating agency, Crisil, has downgraded 14 leading NBFCs due to the inherent risks and declining profit levels involved in the business. It has downgraded NBFCs like Kotak Mahindra Finance Ltd (KMFL), Anagram Finance Ltd of the Lalbhai group, 20th Century Finance Corporation Ltd, Alpic Finance of the Cipla group, Srei International Finance Ltd, Ashok Leyland Finance Ltd of the Hinduja group and Gujarat Lease Financing Ltd.

This spate of downgrading has come in the wake of the problems facing companies like Prudential Capital, JVG Finance, CRB Capital Market and other leading companies. The downgrading of market leaders like Kotak Mahindra and 20th Century Finance is a clear indication of the downturn in the financial services sector in the aftermath of the CRB fiasco.

According to Crisil, the business environment for NBFCs in the last two years has been difficult and this has affected the business and financial performance of the sector. On the funding side, NBFCs have been facing a slowdown in deposit mobilisation. “A drop in deposit renewal rates could lead to liquidity problems where the NBFCs have locked into relatively long term assets and have asset liability mismatches. Further, given the state of the primary market, NBFCs have not been able to recapitalise themselves, which has resulted in increase in leveraging levels of the industry,” Crisil said.

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While KMFL has been showing a brave face before the retail investors, the company’s NCDs have been downgraded from `AA+’ to `AA’. TheFD programme has also been downgraded from FAAA to FAA+. The FD programme of 20th Century Finance Corporation has been downgraded to `FAA+’ from `FAAA’. While the revised rating still indicates that the degree of safety regarding payment of interest and principal is high, the rating revision is based on sectoral factors affecting the NBFC business in the current environment. “The asset mix of TCFC continues to have exposure of plant and machinery which are prone to these sectoral risks,” Crisil said.

In the case of Anagram Finance of the Lalbhai group, the non-convertible debentures have been downgraded from `AA-‘ to `A+’. The FD programme has been downgraded from `FAA’ to `FAA-‘. The FD programme of Alpic Finance, another leading NBFC, has been downgraded from `FAA’ to `FAA-‘. The FD programme of Cholamandalam Investment, a company based in South, was also downgraded from `FAAA’ to `FAA+’. The FD programmes of Amrutanjan Finance, Ashok Leyland Finance, Dabur Finance, Dhandapani Finance, Gujarat Lease Financing, Instalment Supply, KG Denim Finance, SREI International Finance and VLS Finance were also downgraded. Whirlpool Financial was put on `Rating watch’.