The agency cut ratings of non-convertible debentures, subordinated (Tier-II) bonds, long-term funds-based limits and long-term loans to AA from AA+,amounting to Rs 20,867 crore.
Rating agency ICRA on Tuesday downgraded the long-term rating of Piramal Capital & Housing Finance (PCHFL). The agency cut ratings of non-convertible debentures, subordinated (Tier-II) bonds, long-term funds-based limits and long-term loans to AA from AA+,amounting to Rs 20,867 crore. The rating on commercial paper (CP) programme remained unchanged at A1+, amounting to Rs 9,000 crore.
Fund houses such as Aditya Birla Sun Life MF, Axis MF, Franklin Templeton MF and Kotak MF, among others, have investments in PCHFL of approximately Rs 3,600 crore. In FY19, the company, which is a wholly-owned subsidiary of Piramal Enterprises, reported a net profit of Rs 1,443 crore on a total income of Rs 5,572 crore.
“The outlook on the long-term rating continues to remain negative given its predominantly wholesale book, with large sized exposures particularly in real estate and infrastructure segment. While PCHFL has hitherto demonstrated its ability to maintain adequate asset quality, a prolonged slowdown in the real estate industry, coupled with the liquidity crunch in the overall market, could have an adverse impact on the same,” Icra noted.
As per the asset-liability statement as on March 31, 2019, PCHFL has debt repayments aggregating to approximately `10,300 crore due in the 6-month bucket.
PCHFL has inflows of approximately Rs 10,200 crore in the same bucket, including current liquidity (cash balance and unutilised bank lines) of approximately Rs 5,200 crore and collections due from its loan book of approximately Rs 5,000 crore. Icra expects PCHFL to tie up additional bank lines in the near future, while also generating liquidity through strategic asset sale.
PCHFL maintained liquidity of approximately Rs 5,240 crore, including undrawn bank lines (including sanctioned external commercial borrowings of Rs 1,050 crore) as on May 31, 2019. Icra also notes the company’s stated intention to maintain liquidity equivalent to at least two months’ debt repayments and net disbursements. The rating agency expects the company to achieve the same by the end of FY20.
Icra has also taken note of the high, albeit declining, share of short-term sources of funding in the company’s resource profile (about 16% of total debt as on March 31, 2019, compared to around 36% as on September 30, 2018).