ICRA said it revised the short-term rating outstanding for the Rs 8,000-crore commercial paper (CP) programme of DHFL to A2+ from A1+. As on date, DHFL has CP outstanding of Rs 1,525 crore
Dewan Housing Finance Corporation shares plunged 8 percent intraday on February 26 after rating agency ICRA downgraded commercial paper programme and continued to keep the company on watch with negative implications.
The stock was quoting at Rs 132.95, down Rs 3.75, or 2.74 percent on the BSE, at 12:15 hours IST.
ICRA said it revised the short-term rating outstanding for the Rs 8,000-crore commercial paper (CP) programme of DHFL to A2+ from A1+. As on date, DHFL has CP outstanding of Rs 1,525 crore.
The company has indicated to ICRA that it will buyback a substantial portion of this amount over the next one month.
"The rating revision takes into account the moderation in the company's financial flexibility owing to challenges faced in raising funds from traditional bank lines and debt market instruments, and the consequent impact on the company's ability to generate fresh business," ICRA said.
DHFL has been regular in meeting its debt obligations with repayments largely supported by sizeable securitisation and assignment of loan assets.
With limited fresh business generation and sizeable securitisation and assignment of loan assets, the rating agency said the pool eligible for sell down has also been declining, thereby reducing the company's ability to refinance through securitisation.
While the present resources, along with monthly collections, would be adequate to meet the scheduled repayments till March 2019, the liquidity position could get stretched in case of any acceleration of debt by the lenders and/or higher-than-anticipated premature deposit withdrawals, according to ICRA.
The rating agency feels the risk is further heightened by the moderate economic capitalisation levels, concentration risks arising out of 17 percent exposure (as a proportion of AUM as on December 31, 2018) to the construction finance segment, a large part of which remains under construction/moratorium, and the reduced ability of DHFL to support fresh business.
On the ICRA downgrade note, the company clarified saying the rating was for outstanding commercial papers of only Rs 1,525 crore out of a rated amount of Rs 8,000 crore, which forms less than 2 percent of the company's outstanding borrowings.
Company said in its borrowings, ICRA has rated only the short-term instruments of company namely commercial papers; and post repayment of outstanding CP of Rs 1,525 crore, it will not have any outstanding commercial paper rated by ICRA.
Since the liquidity crisis in September 2018, which had impacted the HFC/NBFC sector as a whole, DHFL had been able to come out strong by discharging all its liabilities of Rs 17,876 crore till December 31, 2018 that includes Rs 9,965 crore of commercial papers, the company added.
Hence DHFL said this rating action is not merit based at all, especially at a time, when the company has demonstrated its overall commitments including asset sell down like it did with its stake in Aadhar HFC, reducing CP exposures, etc.
The company has plans to reduce the project loan book through portfolio sales, plans for selling its stake in non-core businesses and onboarding a strategic investor.
While the sale of stake in Aadhar Housing Finance Limited has been announced, it would be subject to regulatory approvals, ICRA said.
The company has also been able to conclude the sale of one of its construction finance loans amounting to Rs 1,375 crore.
The stock lost 80 percent of its value in the last six months, especially after the liquidity crisis in September 2018.
