CARE downgrades Reliance Home Finance NCDs to ‘default’

RHF says rating action uncalled for

MUMBAI: Close on the heels of Reliance Home Finance Ltd (RHF) extending the maturity of Rs400 crore NCDs by four months with the consent of the debenture holders, the CARE Ratings has downgraded the NCDs to Default rating (D).

CARE has stated this action is primarily due to rescheduling of non-convertible debentures. Reliance Home Finance argued that the extension of maturities by mutual consent of Debenture Trustee and NCD Holders is a recognised global practice to deal with severe dislocations in capital markets, and does not in any sense constitute a default.

The rating of other NCDs issued by the company remains unchanged. “The company considers the rating action untimely and an uncalled for action. There has not been any adverse change in the company’s operational parameters from the time of the last rating actions,” the company said in a statement.

Liquidity has been a concern for the entire sector as lenders have virtually stopped funding to housing finance companies (HFCs). RHF has assets under management (AUM) of Rs16,288 crore as on December 31, 2018.

RHF has been securitizing the assets from time to time to meet the liquidity requirements of the company. “Rating action primarily reflects timing mismatch between monetization of assets and servicing of debts, and the company has also issued a media release in this regard on June 29, 2019,”RHF explained further.

RHFL said it has already monetised over Rs5,000 crore of retail assets, adding that it will continue to do so to meet its debt servicing obligations. The housing finance sector is dealing with an extraordinary situation where all categories of lenders in the country have completely frozen new lending to private sector companies for the past nine months.


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