Reliance Capital tanked 8.77% to Rs 28.60 after credit ratings agency, CARE, on Friday, 20 September 2019, downgraded its rating on the company's debt to CARE D.
CARE on Friday, 20 September 2019, downgraded the rating to CARE D for the company's long-term debt program, market linked debentures and subordinated debt of the company, due to delay in payment of interest by one day.Reliance Capital clarified that it is fully current on all its principal and interest repayments as on date. The interest payment for NCDs which was due on 9 September 2019 was duly activated on the due date, but the same could not go through owing to technical glitch in bank servers on that date, and the payment went through on the very next bank working day i.e. 11 September 2019.
The company added that CARE has arbitrarily disregarded the above confirmation provided by third party independent parties that established the alleged delay was on account of technical glitch in bank servers, while funds had duly been arranged on the due date.
CARE has acted in a pre-meditated and prejudiced manner, and has even suppressed the above facts completely in its rating action letter, thereby making it appear as if the company had defaulted in payment of interest by a day, whereas the reality is documents had been provided to CARE that proved funds had duly been arranged on the due date, and the alleged delay was on account of technical glitches. CARE did not even give the company an opportunity to provide comments on the rating action rationale as published, Reliance Capital added.
Meanwhile, the S&P BSE Sensex was up 1,182 points or 3.11% to 39,196.20. The market surged after the Finance Minister Nirmala Sitharaman on Friday, 20 September 2019, slashed corporate tax rate to 22% without exemptions. The effective corporate tax rate after surcharge now stands at 25.17%. The step has significant positive implications for corporates' profitability, broader economy and market valuations.
Shares of Reliance Capital lost 22.28% in five trading sessions to its current market price of Rs 28.60, from a recent closing high of Rs 36.80 on 16 September 2019.
On the BSE, 25.91 lakh shares were traded in the counter so far compared with average daily volumes of 24.21 lakh shares in the past two weeks.
The stock hit an intraday high of Rs 31.05. It hit an intraday low of Rs 28.35, which is also a 52-week low for the counter so far during the day. The stock hit a 52-week high of Rs 369.30 on 21 September 2018.
The stock had underperformed the market over the past one month, down 26.24% compared with 1.84% fall in the Sensex. The scrip underperformed the market in past one quarter, down 54.60% as against Sensex's 4.01% fall. The scrip had also underperformed the market in past one year, down 90.71% as against Sensex's 3.18% fall.
Reliance Capital's consolidated net profit surged 353.3% to Rs 1,233 crore on a 30.6% rise in total income to Rs 6,126 crore in Q1 June 2019 compared with Q1 June 2018.
Reliance Capital is a non-banking financial services company which has interests in asset management and mutual funds, pension funds, life and general insurance, commercial finance, home finance, stock broking services, wealth management services, financial products distribution, asset reconstruction and other activities in the financial services sector.
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