Housing finance firms comfortably placed to meet debt obligations: Report

Having raised about Rs 34,000 crore from the obligation showcase and the National Housing Bank in the previous two months, lodging fund organizations (HFCs) are serenely positioned to meet their obligation commitments notwithstanding lower assortments, as indicated by a report. The all out developing obligation of HFCs for 2020-21 is evaluated to be Rs 2.9-3.2 trillion, of which Rs 1.4 trillion is represented by obligation markets, rating office ICRA said in the report.
"As HFCs raised roughly Rs 34,000 crore through obligation showcase course and from NHB during April and May 2020, all things considered, the majority of the HFCs will keep up a satisfactory liquidity profile for meeting their obligation commitments even with lower assortment levels (50-80 percent ) in the portfolio," ICRA Vice-President (money related division appraisals) Supreeta Nijjar said in the report.
The discoveries depend on the examination of the rating office evaluated HFCs representing around 90 percent of the sectoral resource under administration. The discoveries have shown that HFCs weighted normal on monetary record money and fluid speculations remained at around seven percent of the AUM as on March 31, and at 12 percent, including the authorized subsidizing lines.

The accessible liquidity could normally cover around two months of obligation reimbursements of most HFCs, while access to the endorsed subsidizing lines could upgrade the spread to a quarter of a year, Nijjar said.

Covid-19: Taj-GVK Hotels seeks moratorium on loan repayments from lenders

Faced with severe pressure on revenues, TajGVK Hotels & Resorts Ltd, a joint venture of Tata group’s Indian Hotels and GVK group, is approaching lenders for a moratorium on loan repayments under RBI’s Covid-19-Regulatory Package.

TajGVK did not honour payment obligations falling due in March 2020, pertaining to a Rs 94.75 crore term loan, according to rating agency ICRA.

The rating agency affirmed “A+” rating for long term loans and “A1+” for short term loans. However, it revised the outlook on rating from “stable” to “Negative”.

ICRA said it has not treated the missed payment as a default for now, despite absence of a formal approval from the lenders allowing for payment relief. This is based on expectations that a formal approval for rescheduling the loan would be received soon, as permitted by the RBI. Non-recognition of default in this case is also in line with the guidance provided by Securities and Exchange Board of India (SEBI).

If the lenders do not approve of the moratorium in due course, it would review the above stance on default recognition, ICRA added.

All the six properties of the company remain shut due to the lockdown announced by government to contain the spread of the Covid-19 pandemic. The duration and scope of the lockdown is still uncertain. Its impact on the economy and discretionary spends in the coming months will have a significant impact on the company’s performance.

Covid-19 impact: Commercial vehicle sales to contract another 8-10% in FY21

The commercial vehicle (CV) industry, already under pressure due to the economic slowdown, axle load norms, GST and other issues, is now facing another challenge in the coronavirus outbreak. These factors are likely to lead to a further contraction of 8-10% in FY21, with profitability and credit metrics of CV OEMs likely to remain under pressure.
ICRA said that it continues to maintain a negative outlook for the commercial vehicle (CV) segment over the near-term, given the slowing economic growth, current overcapacity in the CV ecosystem and not so benign financing environment, with challenges further aggravated by the recent and rapid spread of novel coronavirus in India. The demand headwinds are expected to continue over the near-term given the macroeconomic challenges in view of the recent pandemic outbreak, coupled with weakening financial profile of fleet operators and significant price hikes because of transition to BS-VI emission norms. This would exert pressure on earnings and overall credit profile of CV OEMs, which have witnessed sharp earnings contraction over the past 3-4 quarters.
Shamsher Dewan, Vice President, ICRA, said that in particular, the M&HCV (truck) segment has been significantly impacted over the past year, with volumes contracting by a sharp 42 per cent in 2019-2020.
The excess capacity created in the system after the revision of axle load norms in July 2018 and faster turnaround of vehicles post GST implementation, coupled with a slowdown in the economy and infrastructure projects and the resultant lower freight availability continue to weigh on demand prospects.

Moreover, the rapid spread of coronavirus and the lockdown imposed in the country has had a significant impact on the movement of goods and freight availability over recent weeks and is likley to continue over the near-term. Accordingly, the outlook for the next fiscal, especially the first half, remains weak given the macroeconomic headwinds in view of recent pandemic outbreak coupled with significant price hikes because of transition to the new emission norms. Any recovery in the latter half hinges on a pick-up in construction activity. However, despite some channel inventory filling measures of OEMs, M&HCV (Truck) sales are expected to close the upcoming fiscal with a further decline of 12-14% during FY21, said Dewan

India's cash crunch is weighing on financial health of companies

Company News

India's cash crunch is taking its toll on the health of companies and risks inflicting further financial damage, after the credit profile of local firms deteriorated at the fastest pace in six years.
There were two issuer rating downgrades for every upgrade in the first three months of 2019, the worst ratio for any first quarter since at least 2013, according to a Bloomberg News review of moves by three of the nation’s biggest credit raters: Care Ratings, ICRA and India Ratings & Research. Lower ratings force borrowers to pay more for money in debt markets.

The Reserve Bank of India on Thursday cut interest rates for a second time this year, citing economic headwinds. Policy makers have struggled to guide financing costs lower for companies. Creditors remain wary after the collapse last year of non-bank lender Infrastructure Leasing & Financial Services Ltd. added to bad loan problems. That's a challenge for Prime Minister Narendra Modi who is trying to get the economy back on steadier footing as national elections kick off this week.

In one sign that the problem has lingered, Care Ratings Ltd downgraded more companies than it upgraded for the first time in six years in the 12-month period through March 31. The worsening "can largely be attributed to the liquidity crunch and decline in operating profits," Care said in a report.
As the central bank tries to get more money flowing through the financial system, it has embarked on its most aggressive monetary policy easing in more than three years. On Thursday it said it will set up a task force to explore the development of the secondary market for corporate loans. The RBI also injected additional funds into the banking system last month to boost liquidity through a rare currency swap.


 "The cash crunch is a concern for regulators too, who are trying to step up liquidity," according to Rajesh Mokashi, managing director at Care Ratings.

Inadequate tariff revision in FY20 a concern for discoms, says Icra

Economy & Policy:

Inadequate revision of rates alongwith delay in filing tariff petitions are likely to remain an area of concern in the financial year 2020 for distribution companies (Discoms), says a report.
Discoms have already managed to bring down its losses and debt levels significantly under the UDAY scheme.

According to the rating agency Icra, state distribution utilities in 17 of the 29 states have filed tariff petitions for FY20, reflecting less-than-satisfactory progress.

"The delay in filling of tariff petitions by the Discoms is a deviation from terms of the UDAY scheme, wherein they were required to file the plans in a timely manner so that the State Electricity Regulatory Commissions (SERCs) would issue the tariffs orders by March end," Icra said.
It further noted that tariff hikes proposed and approved for the past 2-3 years have remained lower than what was agreed under the UDAY, leading to persistent gap between average tariff and average cost of supply, though reducing from earlier years.

As per statistics, the median tariff hike for the Discoms at all India level has reduced from 8 percent for FY15 to 4 percent for FY16 and FY17 and further to 3 percent and one percent for FY18 and FY19, respectively.


 "We expect the tariff hike to remain subdued for FY20 as well, given the limited or no tariffs hikes proposed by most of the discoms and in view of the upcoming Lok Sabha elections. This is likely to slow down the process of financial loss reduction which was initiated by the UDAY measure," Icra senior vice president Sabyasachi Majumdar said.