ICRA downgrades Piramal Housing, Edelweiss Financial

‘NBFCs face challenges in mobilising resources’

Rating agency ICRA has downgraded several debt instruments of Piramal Capital & Housing Finance and Edelweiss Financial Services mainly due to challenges faced by NBFCs in mobilising resources.

The rating agency highlighted the increasing challenges in resource mobilisation for non-banking financial companies (NBFC) and housing finance companies (HFC), including Piramal Capital & Housing Finance Limited (PCHFL), which impact their financial flexibility. “These challenges stem from the current operating environment and the risk- averse sentiment of investors towards non-banks, particularly wholesale-oriented financiers.

“PCHFL has witnessed an increase in its cost of borrowings, in line with the trend observed in the sector, during recent months, along with shortening of tenor for its commercial paper (CP) borrowings,” ICRA said.

PCHFL’s non-convertible debentures, subordinate bonds, long-term loans and commercial paper were downgraded by the ratings agency.

Edelweiss Financial Services’ ₹466-crore long-term non-convertible debenture programme was downgraded to AA- with a negative outlook from [ICRA] AA (negative).

Increased vulnerability

“The rating downgrade reflects the increased vulnerability in the Edelweiss Group’s wholesale lending book with the heightened risk profile of the underlying assets, comprising real estate and structured debt transactions across sectors, and the consequent rise in stressed exposures,” ICRA said. The rating agency said the largely untested nature of the book and the constrained financial flexibility of the underlying borrowers due to a slowdown in the core operations and the leveraged capital structure further adds to the concerns regarding the wholesale book. The the current operating environment and the risk averse sentiment of investors towards non-banks, particularly wholesale-oriented entities, the ability of non-banks to mobilise resources at adequate rates is expected to remain constrained over the near to medium term, it added.

ICRA has withdrawn ratings of various instruments at the request of Edelweiss Financial Services.