ICRA downgrades RHFL short-term debt from A4 to D

Discussions on with PE partners for equity infusion

MUMBAI: ICRA has revised the rating for the short-term debt programme of the Reliance Home Finance Ltd (RHFL) from A4 straight down to D. ICRA has stated this action is primarily due to delay in servicing of repayment obligations and modest liquidity in relation to the size of borrowings.

ICRA said the rating action primarily reflects timing mismatch between monetization of assets and servicing of debts. RHFL said it has been affected by a timing mismatch with regard to the on-going further securitisation/ monetisation proposals with banks, etc., and the same has resulted in minor delay on principal repayments aggregating to Rs542 crore to around 5-6 banks, and limited only to its bank borrowings.

RHFL has said it expects to regularise all such repayments soon.

A statement from RHFL on April 27 had noted that for the past seven months, ever since the IL&FS episode, all categories of lenders in India, including banks, mutual funds, etc., have put an almost complete freeze on additional lending to home finance companies (HFCs) and Non-Banking Finance companies (NBFCs), and have instead only been insisting upon reduction of existing borrowings. “Over this entire period, lenders have been willing to only securitise existing asset pools of HFCs and NBFCs to provide resources for meeting debt servicing obligations. These unprecedented actions lasting for more than six months have severely impacted the financial flexibility of almost all HFCs and NBFCs in the country including RHFL,” an official statement had noted.

RHFL said it had already completed securitisation of over Rs5,500 crore from October 1, 2018 till date, and was engaged in active discussions for further securitisation / monetisation of its asset base. The company also had said it was completely current and regular in servicing interest on its entire debt as on date.

RHFL is also completely current and regular on principal repayments on all its capital market borrowings aggregating Rs7,708 crore.

Future Strategy

RHFL had also said that its wholesale loan book would be fully unwound by March 31, 2020, and corresponding borrowings repaid entirely.

The company said it had commenced discussions with several potential strategic / PE partners for equity infusion into the business, accompanied with acquisition of complete management control. RHFL’s present sponsor, Reliance Capital Ltd., will continue as a minority financial investor as it sees future long term upside in the sector, upon restoration of normalcy and a more supportive and conducive environment.

 

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