Rating agency ICRA has downgraded Reliance Capital’s short-term debt worth Rs 950 crore to A4. ICRA announced that the rating watch is with negative implications due to the company’s slow monetization of the non-core investments and liquidity position in Reliance Commercial Finance Limited (RCF) and Reliance Home Finance Limited (RHF).
As a response to the rating agency, the company said that this rating action is limited to the commercial paper outstanding of Rs. 950 Crore, which would be fully repaid by September 30, 2019. Reliance Capital is in the process of monetising its entire 42.88% stake in Reliance Nippon Life Asset Management Limited, which at current market price is valued at over Rs.5,000 crore. They expect to realise a premium on this monetisation.
The rating agency has still not looked into these material and positive factors and has instead mechanically revised the rating as above, resulting in an unwarranted and uncalled, ill-timed rating action, it added.
A week ago, CARE Ratings and Brickwork Ratings also revised the long-term rating of various existing debt instruments of Reliance Capital. CARE placed the company on credit watch with negative implications.
Both rating agencies believed that the group is facing discrepancies in the liquidity profile due to the challenges faced by Reliance Capital and its key lending subsidiaries. They revised their rating due to the extension of timeline for progress of planned divestments in various companies.
On Tuesday, the National Company Law Appellate Tribunal (NCLAT) allowed insolvency proceedings against Reliance Communication (RCom) after the Anil Ambani-led firm withdrew from such a move.
RCom had moved the application to withdraw its challenge to the insolvency order after its board felt insolvency was the best course after failed attempts to revive the firm. An NCLAT bench headed by Chairman Justice S J Mukhopadhaya ruled that moratorium on liabilities would start.
