CRISIL on Tuesday downgraded Indiabulls Housing Finance Ltd's (IBHFL) long-term debt instruments rating to 'CRISIL AA+' from 'CRISIL AAA' and reaffirmed commercial paper (CP) issue and short-term non-convertible debenture rating at 'CRISIL A1+'.
The rating agency also revised its rating watch on the long term debt instruments to 'watch with developing implications', citing the evolving situation on the bank transition and challenges on the funding access front for non-banking financial companies (NBFCs).
The rating action is on account of continued challenging operating environment for NBFCs, including housing finance companies (HFCs), with issues in funding access, especially for those with a wholesale lending book.
"CRISIL has withdrawn its rating on non-convertible debentures of Rs 200 crore in line with its withdrawal policy. CRISIL has received independent confirmation that these instruments have been fully redeemed," the rating agency said in a statement.
The agency said it will resolve the rating watch and take a final rating action once there is clarity on the regulator's stance on the proposed merger with Lakshmi Vilas Bank, the organisational structure and business strategy of the merged entity.
Earlier in April 2019, the company had announced a proposal to merge with Lakshmi Vilas Bank, a small bank in India, and get converted into a bank. The company has received the approval from the Competition Commission of India (CCI) for this and is now awaiting regulatory approval from RBI.
The agency said that it will also continue to monitor the fund raising by IBHFL, both in terms of the quantum as well as the cost.
"Although IBHFL has been raising resources since September 2018 on an ongoing basis, the ease of raising resources and the cost of these resources have been impacted and improvements on this front have not materialised as expected," CRISIL said.
The company raised around Rs 12,500 crore between April 1, 2019 and August 31, 2019 as compared to around Rs 17,000 crore raised in the quarter ended March 31, 2019.
"The ratings continue to reflect CRISIL's expectation that IBHFL will maintain its sizeable presence in retail mortgage finance. The rating also factors in IBHFL's comfortable asset quality in the retail portfolio, robust capitalisation, healthy profitability, and sufficient liquidity," it added.
Earlier in July this year, CRISIL had revised its rating outlook on the company's long-term facilities to 'rating watch with negative implications' after the company announced its scheme of amalgamation with Lakshmi Vilas Bank (LVB).
Last month, global rating agency Moody's downgraded Indiabulls Housing Finance Limited's long term corporate family rating to Ba2 from Ba1, citing renewed pressure on the cost and availability of funds. The credit rating agency has also changed the outlook to negative from stable. The agency said that it does not expect the rating to go up over the next 12-18 months.
Edited by Chitranjan Kumar