Moody’s puts India Infoline, Hero FinCorp under rating review for downgrade

Muthoot Finance outlook changed to negative from stable

Moody’s has put non-banking financial companies (NBFCs) India Infoline Finance and Hero FinCorp under rating review for downgrade.

The rating agency also changed Muthoot Finance’s outlook to negative from stable.

Moody’s said the NBFC industry had been affected by disruptions to India’s economic activity arising from COVID-19 outbreak, which will weaken these companies’ credit profiles.

“We expect the asset quality of these three companies to deteriorate on the back of rising loan delinquencies and defaults, as some customers and businesses will struggle with payments given declining earnings due to the 21-day nationwide lockdown across India,” said Alka Anbarasu, a Moody’s vice-president and senior credit officer.

Moody’s expects Muthoot’s asset quality to perform better than the other two companies because of its focus on lending against gold jewellery, which is supported by ‘highly liquid collateral,’ the value of which has appreciated in the past year.

“While these companies have been able to attract new loans and roll forward maturing obligations from Indian banks, increasing risk aversion amongst Indian banks, especially after the RBI imposed a moratorium on Yes Bank Limited as well as global financial sector volatility, will result in a more challenging funding environment,” the rating agency added.