Moody’s downgrades IIFL Finance to B1

Moody’s has also downgraded the senior secured programme rating of India Infoline Finance to (P)B1 from (P)Ba3.

Moody’s Investors Service on Friday downgraded the corporate family rating and senior secured debt rating of India Infoline Finance (IIFL) to B1 from Ba3. Moody’s has also downgraded the senior secured programme rating of India Infoline Finance to (P)B1 from (P)Ba3. At the same time, Moody’s has placed the ratings under review for further downgrade. Moody’s expects Indian non-bank finance companies(NBFCs) to be affected by the shock as disruptions to India’s economic activity from the coronavirus outbreak will weaken the credit fundamentals of these companies.

IIFL Finance, a non-banking finance company, is likely to start facing asset-liability mismatch (ALM) after September 2020, if moratorium is not provided by the lender banks. The non-banking finance company has provided moratorium to 58% of its customers. The company disclosed it in an investor presentation on Friday after declaring March quarter earnings. IIFL Finance said it had cash and undrawn lines of Rs 2,203 crore, while it has to repay Rs 2,679 crore till September, 2020. The repayment obligation widens to Rs 4,542 crore by December, 2020, as per debt repayment details given by the company.

Nirmal Jain, chairman, IIFL Finance, said, “NBFCs in India have an added challenge of uncertain flow of liquidity.” Sumit Bali, chief executive officer (CEO), IIFL Finance, said that the company has enough liquidity to meet debt requirements till September 2020. “We are also in discussions with banks to raise further liquidity and pursuing banks to extend moratorium on debt and interest repayment,” he added.

IIFL Finance on Friday reported 81% year-on year (y-o-y) drop in net profit to Rs 58.91 crore during March quarter due to provisions related to Covid-19. The NBFC has provided Rs 282 crore for Covid-19 provisioning. The consolidated income stood at Rs 705 crore during March quarter, down 13% y-o-y, IIFL Finance said in a regulatory filing.

Highlighting the risks due to Covid-19, the company said that negative sentiment for financial sector may limit ability to raise equity. The company’s board at its meeting held on May 28 has approved raising up to Rs 10,000 crore by issuing bonds on a private placement basis. Besides, it cleared a proposal to raise Rs 5,000 crore by issuing non-convertible debentures (NCDs) to the public in one or more tranches.