Reliance Capital’s default rating puts $13 billion debt of Anil Ambani group at risk

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Updated: September 22, 2019 5:04:33 PM

Reliance Capital Ltd.’s downgrade to default grade at Care Ratings Ltd. places the debt of embattled tycoon Anil Ambani’s conglomerate at risk, reigniting India’s credit scare.

Anil Ambani (Reuters File photo)Mumbai-based Care cut Reliance Capital’s bonds by eight notches to D from BB. (Reuters File photo)
  • By Rahul Satija

Reliance Capital Ltd.’s downgrade to default grade at Care Ratings Ltd. places the debt of embattled tycoon Anil Ambani’s conglomerate at risk, reigniting India’s credit scare.

Mumbai-based Care cut Reliance Capital’s bonds by eight notches to D from BB, citing a delay in coupon payments on several of the lender’s non-convertible debentures, the rating company said in a Sept. 20 statement. That raises the default risk on the debt of the Reliance ADAG Group, which has ballooned to about 939 billion rupees ($13 billion) at four of its biggest units.

The downgrade “will precipitate a chain sequence of events that will gravely harm the interests of millions of retail and institutional investors having direct or indirect exposure to the securities of the company,” Reliance Capital said Saturday in an exchange filing.

Also read: Ease of credit access: Allahabad Bank launches retail, MSE loans linked with external benchmark rates

The default rating is set to exacerbate a year-long credit crunch among India’s shadow lenders, which started with the collapse of IL&FS Group last year. Mumbai-based Reliance Capital has been trying to sell off assets to raise funds while its shares tumbled more than 90 per cent over the past year amid the cash squeeze.

The delay in coupon payments was caused by a “technical glitch in bank servers,” Reliance Capital said in its statement, adding that the rating company did not give the lender the opportunity to provide comments on the downgrade. Payment went through on the next working day after the delay, the shadow lender said.

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