CARE Downgrades Reliance Home Finance’s Debt To Default

CARE Ratings Ltd. downgraded Reliance Home Finance Ltd.’s long-term debt programme to “default”, citing delays in servicing bank debt.

It downgraded the rating on the Rs 4,979.92-crore long-term debt programme of the financial services firm of the Anil Ambani-led Reliance Group to D from BBB+, according to its statement on Friday. It’s the first home finance company to have a default rating since the liquidity crisis that began in September.

There have been considerable delays in parent Reliance Capital Ltd.’s plan to monetise its assets, leading to liquidity issues in Reliance Home Finance, the rating agency said in its statement. Reliance Capital’s weak liquidity position “has led to weakening of these linkages as the parent may not be in a position to extend adequate support to its subsidiaries”, it said.

CARE Ratings said it sought bankers’ feedback on the delay by Reliance Home Finance. But it did not clarify on the feedback provided and the banks they reached out to.

Separately, ICRA Ltd. also downgraded Reliance Home Finance’s Rs 1,200-crore commercial paper programme to A4 from A2.

It downgraded the ratings on outstanding debt of Reliance Capital and both of its financial services subsidiaries, Reliance Home Finance and Reliance Commercial Finance Ltd., according to a statement by the rating agency.

While Reliance Capital and Reliance Home Finance were able to raise funds from the securitisation markets recently, their respective current on-balance sheet liquidity is low in relation to the size of their borrowings, ICRA said.

Non-bank lenders have been under pressure since September when Infrastructure Leasing and Financial Services Ltd. defaulted. But the recent concerns around the Anil Ambani group companies stem from deteriorating liquidity profile.

On April 23, Brickwork Ratings Ltd., CARE Ratings and ICRA had all downgraded Reliance Home Finance and Reliance Capital, citing liquidity concerns. Moreover, Reliance Home Finance has not submitted a no-default certificate to rating agencies for March as required under the Securities and Exchanges Board of India guidelines.

Reliance Home Finance and Reliance Capital, in separate notifications to stock exchanges, had said the rating action is “completely unjustified and inappropriate”. There hasn’t been any adverse change in the companies’ operational parameters since the last time these agencies reviewed ratings, the filings said.