The liquidity crunch that shadow banks are facing post the IL&FS crisis has now hit Anil Ambani’s non-banking finance companies, with Reliance Home Finance and Reliance Commercial Finance delaying on repayment to banks.
Reliance Home Finance and Reliance Commercial Finance said there was a ‘minor’ delay in principal repayments of ₹542 crore and ₹477 crore respectively to five to six banks.
Ratings downgrade
CARE Ratings had downgraded various instruments of Reliance Home Finance Ltd. (RHFL), a mortgage lender, including its long-term debt programme that was downgraded to D, from BBB+, last week.
“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 and non-banking finance companies, and have been insisting upon reduction of existing borrowings,” RHFL said in a statement.
The company said it had been affected by a timing mismatch with regard to the ongoing further securitisation /monetisation proposals with banks. This, it said, has resulted in a ‘minor’ delay in principal repayments aggregating to ₹542 crore to around five to six banks, and limited only to its bank borrowings.
Reliance Commercial Finance Ltd. (RCFL) said its wholesale loan book would be fully unwound by March 2020 and corresponding borrowings repaid entirely. “RCFL has commenced discussions with potential strategic/PE partners for equity infusion into the business, accompanied with acquisition of complete management control,” RCFL said in a statement. It added that parent firm Reliance Capital (RCap), would continue as a minority financial investor.
CARE also downgraded various debt instruments of RCap. “Reliance Capital's entire short term debt to stand fully repaid and become zero prior to 30th September 2019 from sale proceeds of 43% stake in RNAM [Reliance Nippon Life Asset Management],” RCap said in a statement. Liquidity issues in the Reliance Capital arms has also impacted Reliance Mutual Fund, which has exposures of ₹535 crore and ₹1,083 crore to long-term non-convertible debentures issued by RCFL and RHFL respectively.
These exposures are held in roughly 10% of RMF’s total 166 fixed income and hybrid schemes. The MF house said there will be mark-to-market impact due to the investments in Reliance Home Finance and Reliance Commercial Finance.
“...till maturity of the instruments, and in line with SEBI regulations, there will be a mark to market valuation impact on the above exposure, basis revised valuation provided by independent valuation agencies, with corresponding impact on NAVs of schemes holding these investments,” Reliance Mutual Fund said.
