Free Press Journal

IL&FS books come under RBI scanner


Mumbai : The Reserve Bank of India (RBI) has started a special audit on Infrastructure Leasing & Financial Services (IL&FS).

The development comes after the firm defaulted on repaying around Rs 250 crore worth of inter-corporate deposits to Small Industries Development Bank of India (SIDBI). The defaults forced SIDBI to seek intervention from the central bank, following which RBI initiated a special audit against the firm. As a core investment company, IL&FS falls under the regulatory purview of the central bank.

ICRA downgrade

Meanwhile, rating agency ICRA on Sunday downgraded loan and debentures of infrastructure financing firm IL&FS to ‘default risk’ citing liquidity pressure on the group on the back of sizeable repayment obligations.

The ratings of Infrastructure Leasing & Financial Services (IL&FS) is kept under “under rating watch with developing implications.

The long-term rating of IL&FS’ Rs 5,225 crore non-convertible debenture programme and the Rs 350 crore term loans has been cut to ‘BB’ from ‘AA+’. Also the short-term rating for the Rs 2,500 crore commercial paper programme of IL&FS has been lowered to ‘A4’ from ‘A1+’.

Instruments with ‘BB’ rating are considered to have moderate risk of default regarding timely servicing of financial obligations. ‘A4’ rating implies high credit risk and are susceptible to default.

“The liquidity profile of the IL&FS Group is currently stretched given the sizeable repayment obligations at group level in the near term and deterioration in credit profile of key investee companies,” ICRA said.

The downgrade of ratings takes into account the increase in liquidity pressure at the group level, it said.

“While the company is in the process to raise Rs 8,000 crore of funds from the promoter group, timely receipt of the same is important to improve the group’s overall liquidity profile. Further clarity is awaited on the timing of these inflows and given the sizeable repayment obligations of the group’s debt, this remains a key rating sensitivity in the near term,” ICRA said.

The ratings also consider the company’s elevated debt levels owing to the funding commitments towards Group ventures coupled with slow progress on asset monetisation and deterioration in credit profile of key investee companies.