DHFL says CARE's re-rating ‘non-merit based, irrational’

  • Shares of DHFL today fell as much as 5% to 141.40 on the BSE, before paring some losses
  • CARE Ratings has revised the long-term ratings of DHFL

CARE Ratings on Thursday revised DHFL’s long-term ratings, a move the management of the home loan provider alluded to as “non-merit based and entirely irrational decision." Shares of DHFL today fell as much as 5% to 141.40 on the BSE, before paring some losses.

Revising the long-term ratings of DHFL, CARE Ratings said that the revision “takes into account further moderation in financial flexibility due to limited progress of earlier envisaged strategic measures and inflows from securitization deals to build up additional liquidity."

The woes of NBFCs, which started in September with defaults by Infrastructure Leasing and Financial Services Ltd (IL&FS), have hurt sentiment about NBFCs, as witnessed in the stock prices of several leading companies in the sector.

Commenting on CARE's re-rating of DHFL, Kapil Wadhawan, chairman and managing director of the home loan provider, said: "The company expresses concern over CARE's re-rating of DHFL's long-term debt instruments and alludes to it as a non-merit based and entirely irrational decision. Over the last few months, DHFL has accelerated the process of realigning the ownership and management to bring in a broad-based professional ownership with the aim of enhancing stakeholders' confidence."

Wadhawan also said that DHFL has “engaged with large potential entities to identify and on-board the right strategic partner and is in advanced stages of discussions to achieve the same over the next 90 days."

He also reiterated that DHFL continues to honour timely repayments of all its financial obligations as it takes several steps to re-establish normalcy into the business.

“The company continues to be well capitalized and has sufficient retail assets, which it can securitise further to preserve liquidity and service all its financial commitments," he added.

CARE, the rating agency, however, noted some of the initiatives undertaken by DHFL to improve liquidity position.

“CARE has taken note of the achievement of some of the strategic milestones such as sell-down of one of the builder loan exposures worth around 1,375 crore and announcement of stake sale in Aadhar Housing Finance Ltd. to Blackstone," the rating agency said.