Here’s a fresh development. Credit rating agency - CARE Ratings has downgraded ratings on about 1,21,623.92 crore worth of DHFL debt.
In the last month alone the stock is down over 50%
From 2002
Another display of ineptitude by the ratings agencies taking action after the shit had already hit the fan.
Details of the papers being downgraded:
| Instruments/Facilities | Amount(Rs. crore) | Ratings1 | Rating Action |
|---|---|---|---|
| Non-ConvertibleDebentures | 17,655.12 | CARE AA+ (Double A Plus) (Credit watch withdeveloping implications) | Revised from CARE AAA; Stable(Triple A; Outlook: Stable); placed on credit watch with developing implications |
| Subordinated Debt | 2,205 | CARE AA (Double A)(Credit watch with developingimplications) | Revised from CARE AA+; Stable(Double A Plus; Outlook: Stable); placed on credit watch with developingimplications |
| Perpetual Debt | 1,300 | CARE AA- (Double A Minus)(Credit watch with developingimplications) | Revised from CARE AA; Stable(Double A; Outlook: Stable);placed on credit watchwith developing implications |
| Non-ConvertibleDebentures (Public Issue) | 29,000 | CARE AA+ (Double A Plus) (Credit watch withdeveloping implications) | Revised from CARE AAA; Stable(Triple A; Outlook: Stable);placed on credit watch with developing implications |
| Non-convertible Redeemable Cumulative Preference share | 750 | CARE AA (RPS) [Double A (Redeemable Preference Shares)](Credit watch with developingimplications) | Revised from CARE AA+(RPS)(Double A Plus (RedeemablePreference Shares); Outlook: Stable); placed on credit watch with developingimplications |
| Fixed Deposit Programme | 20,000 | CARE AA+ (FD) [Double A Plus (Fixed Deposit)](Credit watch with developing implications) | Revised from CARE AAA (FD);Stable [Triple A (Fixed Deposit);Outlook Stable]; placed on credit watchwith developing implications |
| Long term Bank Facilities | 42,713.80 | CARE AA+ (Double A Plus) (Credit watch withdeveloping implications) | Revised from CARE AAA; Stable(Triple A; Outlook: Stable); placed on credit watch with developing implications |
| Commercial Paper Issue | 8,000(reduced from 15,000) | CARE A1+(A One Plus) (Credit watch with developing implications) | Placed on credit watch with developing implications |
| Total | 1,21,623.92(Rupees one lakh twenty one thousand and six hundred and twenty three crore and ninety two lakh only) |
Key rating weaknesses
Exposure to low and middle income segment with increasing proportion of wholesale loans DHFL has exposure to the lower and middle income group which is more prone to defaults in case of a stressed economic scenario. Further, the proportion of wholesale loans (builder loans) increased to 20% of the outstanding loan book as on September 2018 from 18% as on March 2018 and 14% as on March 2017, which is a relatively riskier segment. Fur ther as informed by the company, by March 2019, the proportion of individual home loans as percentage of total loan portfolio will increase above 51% and proportion of builder loan book to come down to 10% of total loan book as compared to 20% as on Septe mber 30, 2018.
Sharp reduction in share price and rise in bond spreads aggravated by media news
DHFL is a listed company on major the stock exchanges viz. BSE and NSE. Post September 2018, the liquidity scenariotightened for NBFC and HFC sector, and DHFL witnessed sharp rise in yields of bonds traded in the secondary markets andalso sharp reduction in the share price (closing price of Rs.350.55 per share on September 21, 2018 as compared toprevious closing at Rs.610.55 per share on September 20, 2018).DHFL responded to the prevailing market conditions andreduced disbursements in Q3FY19 in order to maintain adequate liquidity and also raised fresh funds through varioussecuritization deals, NCD, CP, FD and bank borrowings.Further, during the last week of January 2019, there was media news related to DHFL which further affected the mark etsentiments which led to a sharp fall in share prices, closing at Rs.111.20 per share on February 1, 2019. This has resultedin moderation in the financial flexibility of DHFL and its ability to maintain its competitive positioning and long termgrowth prospects may be affected if the situation persists for considerable period.
Liquidity profile
As on December 31, 2018 the liquidity statement (excluding unutilized working capital lines & fixed deposit renewals)showed positive cumulative mismatch of Rs.5,954 crore in the short term bucket of up to 1 year. Further, from September24, 2018 to December 31, 2018, company has received net amount of Rs.11,875 crore through various securitizationdeals, which enabled the company to bridge mismatches in short term buckets. Further, during the same period companyraised another amount of Rs.2,750 crore through NCDs, Rs.575 crore through CPs, Rs.500 crore bank borrowing, Rs.402crore through FDs, which is expected to enable the company in bridging the probable mismatches. The company’sreliance on Commercial Paper (CP) borrowing has reduced considerably and current CP outstanding stood at Rs.950 crore,which is less than 1% of total borrowings.As on December 31, 2018, the company had free Cash and Liquid Investments(excluding SLR) worth Rs.3,967 crore.Further, as on January 31, 2019, the company had liquidity worth~Rs.6,500 crore(including SLR).
