New Delhi: Rating agency Crisil on Wednesday downgraded long-term debt rating of Infrastructure Development Finance Company (IDFC) on its delay in mobilising funds.
“The downgrade primarily reflects the delay in IDFC’s capital-raising. As a result, the institution’s capitalisation is likely to remain short of Crisil’s earlier expectations, and well below the levels that supported the earlier rating,” the rating agency said in a release.
It believes that the delay in raising capital will strain IDFC’s capitalisation over the medium term.
“...delay in capital infusion, in combination with increased disbursements, will result in a reduction in IDFC’s capitalisation ratios over the medium term,” it said.
Crisil has downgraded its rating on the long-term debt instruments of IDFC to AA+ from AAA.
Instruments rated ‘AA´ are judged to offer a high degree of safety with regard to timely payment of financial obligations and is one notch down than the highest rating AAA.
CRISIL further said it believes that IDFC is unlikely to raise fresh equity capital in the near term.
However, given the Indian government’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 institution’s capitalisation is expected to remain adequate to support the rating at a high-safety level,” it added.
Crisil further said the ratings on IDFC’s debt programmes continue to be supported by the company’s robust asset quality, adequate earnings profile, and improving revenue diversification.
The company only had a marginal gross non performing asset (NPA) ratio of 0.4% as on 31 March.
“Despite a slow growth in its loan book, IDFC generated a return on assets (RoA) of 2.5% for 2008-09 (refers to financial year, April 1 to March 31),” it added.