CRISIL downgrades IDFC rating to ‘AA+/Stable’ *Non-Convertible Debentures Aggregating Rs.20 Billion * *AA+/Stable (Downgraded from ‘AAA/Stable’) * *Bonds Aggregating Rs.13.5 Billion * *AA+/Stable (Downgraded from ‘AAA/Stable’) * *Rs.13 Billion Short-Term Debt Programme * *P1+ (Rating Withdrawn) *
CRISIL has downgraded its rating on the long-term debt instruments of Infrastructure Development Finance Company Ltd (IDFC) to *‘AA+/Stable’* from ‘AAA/Stable’. The downgrade primarily reflects the delay in IDFC’s capital-raising. As a result, the institution’s capitalisation is likely to remain short of CRISIL’s earlier expectations, and well below the levels that supported the earlier rating. CRISIL understands that IDFC is unlikely to raise fresh equity capital in the near term. CRISIL has also withdrawn the ‘P1+’ rating on the institution’s short-term debt programme. CRISIL’s earlier ratings on IDFC were underpinned by an expectation that internal accruals and capital infusion would help IDFC strengthen and maintain its Tier I capital adequacy ratio (CAR) well in excess of 20 per cent over the medium term. Though a cautious growth strategy has helped IDFC maintain its current Tier I CAR at just above 20 per cent (20.04 per cent as on March 31, 2009), CRISIL believes that the delay in capital-raising will strain IDFC’s capitalisation over the medium term. Also, given the Government of India’s infrastructure investment thrust, significant opportunities for providing finance in the infrastructure domain are expected in the next few years. In such a scenario, IDFC is likely to accelerate lending in an effort to maintain its market position in this segment. CRISIL believes that the delay in capital infusion, in combination with increased disbursements, will result in a reduction in IDFC’s capitalisation ratios over the medium term. Despite this decline, however, the institution’s capitalisation is expected to remain adequate to support the rating at a high-safety level. The ratings on IDFC’s debt programmes continue to be supported by the company’s robust asset quality, adequate earnings profile, and improving revenue diversification. IDFC follows strong risk management practices. As a result, the company had only a marginal gross non performing asset (NPA) ratio of 0.4 per cent as on March 31, 2009. Despite a slow growth in its loan book, IDFC generated a return on assets (RoA) of 2.5 per cent for 2008-09 (refers to financial year, April 1 to March 31). CRISIL also believes that the diversification of IDFC’s revenue and asset profile presents the financial institution with a more stable business model. These strengths are, however, partially offset by the keen competition in infrastructure finance, and the risks inherent in the sector. *Outlook: Stable* IDFC’s capitalisation and earnings are comfortable. The company’s Tier I CAR is likely to reduce over the medium term, but will remain strong enough to support the present rating, given the institution’s excellent asset quality. The outlook could be revised to ‘Positive’ if the company’s capitalisation plans change, resulting in higher Tier I CAR on a sustainable basis. Conversely, steep deterioration in capitalisation, or a weakening in asset quality and earnings, could result in an outlook revision to ‘Negative’. -- Thanks & Regards, Abhishek Kothari --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
