Care Ratings has revised the rating of Chennai-based Repco Home Finance's long-term loan facilities and non-convertible debentures worth Rs 1,620 crore to AA-minus with stable outlook from AA with negative outlook.
The revision factors in moderation in the company's asset quality parameters with increase in gross non-performing assets (GNPAs) from 2.95 per cent in March 2019 to 4.33 per cent in March this year.
Historically, the GNPA levels have remained higher in June and December quarters but remained lower during September and March quarters.
However, GNPA levels continued to remain high during FY20 at above 4.2 per cent in all the four quarters."It is worthwhile to note that GNPA level which had witnessed notable increase post-demonetisation is yet to show improvement and currently the GNPA level has further increased," said Care.
GNPAs witnessed some improvement in June to 4 per cent but continue to be relatively high. GNPAs in non-housing segment continue to remain high at 6.65 per cent as on March 31.
With expected fall in real estate prices and slowdown in economic growth due to impact of COVID-19, said Care, the improvement in asset quality and recovery of bad loans in non-housing segment expected to be delayed.
In view of the Reserve Bank of India (RBI) allowing banks, non-banking finance compes and housing finance compes to offer six-month moratorium to borrowers till August 31, there has been an impact on collections of the company during the moratorium period which may lead to further weakness in asset quality of the company.
The ratings continue to factor in the established track-record of the company in south India, especially in tier 2 and 3 cities, experienced senior management team, comfortable capital adequacy levels and healthy profitability.
Care said the ratings are constrained by regional concentration of loan portfolio and relatively higher exposure to certain risker borrower segments. The rating also takes note of changes in borrowing mix with bank borrowings constituting major portion of total borrowings.
As on June 30, Repco had cash and cash equivalents of Rs 300 crore. Considering the unavailed lines of Rs 3,035 crore and the general prepayment pattern, the company is expected to manage its liquidity.
( With inputs from ANI )
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor