Moody's lowers Indiabulls Housing Finance ratings
MUMBAI: Moody's global rating agency downgraded on Wednesday Indiabulls Housing Finance (IBH) Long-term corporate family rating at Ba2 of Ba1, while changing its outlook to negative from stable.
The company's senior foreign currency guaranteed rating has been lowered to Ba2 from Ba1 and the MTN program's senior foreign and local currency guaranteed rating to (P) Ba2 from (P) Ba1.
The international rating agency said the rebate reflects renewed pressure on the cost and availability of funds for Indiabulls Housing Finance (IBH) and some other financial companies in the country.
The company's incremental financing cost (IBH) increased 45 basis points quarter to quarter through June 2019, while the company's balance sheet declined 7 percent during the same period, the agency said.
This increase in financing costs was a key factor for the decrease of 28 basis points in the differentials in the same period, although profitability remains relatively strong in relation to its peer group.
The rebate also takes into account the deterioration seen in the quality of the assets in the quarter ended June 2019, in which stage 3 loans increased 57 percent quarterly, although from a low base, he said.
Most of the increase in stage 3 loans comes from the company's corporate loan segment.
This segment faces significant winds against the financial companies sector in general, driven by a combination of very tight refinancing conditions and weak borrower profiles.
This segment will continue to be a key source of asset quality risk for the company, he said.
The ratings also reflect the company's solid capital and profitability, which remain relative credit strengths, the agency said.
In April 2019, IBH announced a plan to merge with Lakshmi Vilas Bank and thus become a bank. This proposal is awaiting regulatory approval from RBI.
If approved and consumed, it would be a significant positive credit event for the company, Moody's said.
The agency said the company's perspective has changed to negative to reflect the possibility that strict financing conditions may persist for some time, which could further pressure other aspects of IBH's credit profile, such as profitability and quality. of assets.