Crisil and IDFC have been at loggerheads since October last. That was when the rater first said the infrastructure financier ought to bulk up its capital base. With the lender yet to oblige, Crisil has downgraded it from AAA/Stable to AA+/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 earlier expectations, and well below the levels that supported the earlier rating. IDFC is unlikely to raise fresh equity capital in the near term,” Crisil said on Wednesday.
“Given the GoI’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. The delay in capital infusion, in combination with increased disbursements, will result in a reduction in capitalisation ratios over the medium term,” Crisil said.
The ratings were the highest possible on expectations that internal accruals and capital infusion will help the company maintain its Tier I capital adequacy ratio in excess of 20% in the medium term. But, Crisil said, capital infusion has not been up to the mark.
IDFC retorted late on Wednesday stating that with the risks associated with its businesses, retaining Tier I capital adequacy ratio above 20% “on a consistent basis is excessive and not warranted.”
“IDFC focused on preserving capital, protecting asset quality, improving spreads, containing costs and maintaining liquidity so as to maintain a minimum Tier I capital adequacy ratio of 20%, which, it believed, was sufficient to sustain the highest rating from Crisil,” the company said.
Crisil and IDFC have been at loggerheads since October last. That was when the rater first said the infrastructure financier ought to bulk up its capital base.
Comments