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Mumbai: Care Ratings has downgraded Reliance Home Finance’s long term debt program of Rs 4,979 crore to default due to delay in servicing bank debt.
The rating for long term debt program was downgraded to Care D from Care BBB+ due delays in debt servicing with some of the banks factoring in linkages between RHFL and its parent Reliance Capital.
However, the divestment plans of the group continue to remain critical to the overall credit profile of the group.
Care said that the ratings of RHFL are placed on ‘credit watch with developing implications’ following ratings of its parent company, Reliance Capital Limited (RCL), being put on ‘credit watch with developing implications’ due to its exposure to Reliance Communications Ltd.
which is under default and other group companies.
“The ratings factor in strategic importance of the mortgage finance business to the parent group and expected managerial and financial support from the parent,” said rating company Care in a statement.
The divestment plans of the group continue to remain critical to the overall credit profile of the group.
Reliance Capital is looking to sell stake in mutual fund and general insurance company.
CARE had factored in linkages between RHFL and its parent Reliance Capital Limited (RCL), which are in the form of RCL’s demonstrated track record of support to the subsidiary and strategic importance of the subsidiary to its parent along with sharing of the brand name.
The moderation in RCL’s profile has weakened these linkages as the parent may not be in a position to extend adequate support to its subsidiaries.
The management is exploring new avenues and expects inflow of about Rs.1700 crore from the sale of radio business which has been further delayed and is now expected to be concluded by June 2019.
The company plans to sell up xto 49% stake in Reliance General Insurance via IPO, which, however, has been rescheduled from December 2018 to June 2019.
The company has also announced sale of their entire stake of 42.9% in the AMC business which is under process and expected to be completed by June 2019 (was earlier planned for May 2019).
The company has further committed to exit from its media businesses to pare down its debt levels.
RCL has been able to achieve only about a third of the total exits planned by the management by September 2018 with timelines for other exits being extended.
Some of the key exits achieved during the period FY19 are Yatra Online stake sale and Code masters sale.
As at the end of FY18, RCL had total exposure of Rs.17,653 crore to its group companies in the form of CCDs of Rs.7,700 crore and loans advances of Rs.9,953 crore.
These exposures were mainly towards the non-financial businesses of the group.
However, out of the total investments in the non-financial business, the management has stated timelines for exits from the radio business, Mahindra First Choice and Prime Focus stake sale.
Prime Focus and Mahindra First Choice stake sale is expected to be concluded by May and June 2019 respectively instead of earlier expectations of April 2019.
Timely conclusion of the envisaged divestments will be critical for reducing the leverage of RCL.
