Financial Daily from THE HINDU group of publications
Wednesday, Apr 24, 2002
Money & Banking - Financial Institutions
ICRA cuts IFCI rating further
NEW DELHI, April 23
DEALING a potentially debilitating blow to the restructuring efforts of IFCI, the rating agency ICRA Ltd on Tuesday announced its heaviest downgrade till date of the trouble-prone institution.
While the short and long-term ratings have been downgraded by five notches from A2(+) and LA(-) to A4 and LBB respectively, the medium-term rating has been brought down by three notches from MA to MB.
In what is likely to cripple all further resource-raising efforts by the institution, the revised rating for the short term indicates `risk-prone' while the medium and long-term rating indicate `inadequate safety'.
This is the fourth time in a span of over three years that ICRA, which has IFCI as its principal promoter, has announced a downgrade of the financial institution bringing down the rating gradually from the highest safety grade of LAAA, MAAA and A1+ for the long, medium and short terms respectively to the present levels.
Adding to IFCI's discomfort, ICRA has also said that the revised rating has been placed on rating watch with negative implications.
"It is very unfortunate," the IFCI Chairman and Managing Director, Mr V.P. Singh, told Business Line while reacting to the downgrade.
Mr Singh said that ICRA's decision to announce the downgrade would further add to the troubles of those who have invested in IFCI. "We tried to convince them (ICRA) not to go in for a downgrade at this present time when the institution is making all efforts to pull itself back on the rails. Somebody has to try and understand the problems that the institution has been facing," Mr Singh said.
In fact, Mr Singh lamented that the downgrade came barely a day after IFCI held a major meeting with its creditors and institutional shareholders to convince them of the efforts being made the institution at restructuring.
The meeting was attended by top representatives of over a dozen banks, besides officials of RBI and the Banking Division. "We were assured of support from all those who participated at the meeting," he said.
However, a statement released by ICRA on the downgrade mentions that it had "taken into account the likely response of the sovereign authorities to support IFCI. The revised rating factors in IFCI's efforts duly supported by the Government due to IFCI's position in the Indian financial system, to restructure the liabilities."
ICRA has further said that the new ratings "also take into account the continued pressure on liquidity due to asset-liability mismatches and low recoveries from assets due to high NPAs resulting in delays in meeting some of its obligations."
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