Markets

Moody’s downgrades Indiabulls

Moody’s corporate headquarters in New York. File

Moody’s corporate headquarters in New York. File   | Photo Credit: Reuters

The rating agency said an extended period without access to funding could result in significant damage to Indiabulls’ franchise.

Moody’s Investors Service has downgraded the corporate family rating (CFR) and foreign-currency senior secured rating of Indiabulls Housing Finance Limited (Indiabulls) to B3 from B2.

In addition, Moody’s has downgraded Indiabulls’ foreign and local currency senior secured MTN programme ratings to (P)B3 from (P)B2. The outlook on all ratings remains negative, it said, adding, “The downgrade and negative outlook reflect Moody’s expectation that Indiabulls’ access to funding will remain challenging for longer than expected. This is because wholesale funding markets remain largely closed to many financial institutions following the imposition of a moratorium on Yes Bank as well as the broader risk aversion currently prevalent in financial markets globally,” Moody’s said.

The rating agency further said that there is significant uncertainty around when Indiabulls will regain access to market funding which will result in an increase of Indiabulls’ reliance on asset sales as the primary source of liquidity to repay maturing obligations.

“Prima facie, expected cash inflows (customer loan repayments) are sufficient to meet outflows (debt repayments). However, loan repayment rates and debt prepayments are volatile, increasing the risk of a missed payment and as result the risk to creditors. Highlighting these risks, debt repayments over the last nine months ending December 31, 2019 were much higher than the company expected,” it said.

The rating agency said an extended period without access to funding could result in significant damage to Indiabulls’ franchise. The mortgage lender’s loan book has been contracting since December 2018, and new disbursements have reduced significantly. This could lead to reduction in profitability because of lower net interest margins and higher cost-to-income ratios.

Moody’s also expects the company’s asset quality will continue to weaken. “Real estate developers are among the most stressed borrowers in India and are facing the brunt of risk aversion by way of tight access to funding. With the operating environment in India remaining challenging, Moody’s expects the home loans and LAP portfolios will also continue to deteriorate,” it added. (End)

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Printable version | Mar 30, 2020 1:15:16 PM | https://www.thehindu.com/business/markets/moodys-downgrades-indiabulls/article31156237.ece

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