Rating agency Icra has put three microfinance institutions (MFIs) on watch with negative implications.
Cashpor Micro Credit’s non-convertible debentures, Sambandh Finserve’s term loans and SV Credit Line’s NCD, bank line and subordinated debt programmes, and preference shares have come under watch as a result of the impact of demonetisation on the companies’ liquidity and asset quality indicators.
Icra said the risk of Cashpor’s credit quality deteriorating in near to medium term is relatively high as its total debt to net worth is 12 times as on September 30. The company’s limitations on increasing core capital also affect its solvency indicators.
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As for Sambandh, apart from its high debt to net worth ratio of 8.5, the worsening cash flow situation of its borrowers is likely to hit its collection efficiency. “The uncertainty on the likely near-term collection efficiency has been increased owing to a possible worsening of credit culture,” Icra said.
SV Credit Line is staring at similar issues as a result of demonetisation. States such as Uttar Pradesh and Madhya Pradesh, where the company has presence, have been rife with speculations of loan waivers, which, in turn, have hit its collection efficiency.