Risk alert!

Risk alert!

Last updated: 26 Nov, 2020 | 08:39 am

Risk alert!

Moody’s has raised concerns over the credit ratings of IndiaBulls Housing Finance and IIFL Finance in its latest report. You have exposure to some of the bonds issued by these companies.

What is the concern?

  • Moody’s has noted that the Asset Quality of these NBFCs will deteriorate as delinquencies will rise in the companies after the support programs (such as loan restructuring and the loan moratorium) ends, given the severity of the pandemic's impact on India's economy. 
  • Various types of support measures for the borrowers have helped the asset quality of IIFL Finance and IndiaBulls Housing in the first half of FY21.
  • The RBI had permitted banks and NBFCs to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the RBI in September permitted one-time restructuring of advances of companies and retail borrowers hit by the pandemic. While these assets don’t have to be marked as NPAs, the companies have been asked to disclose details of the restructured assets.

INDmoney Analysis

INDmoney had alerted users to exit their investments in IndiaBulls Housing Finance, after rating agency Moody’s downgraded its issuer rating from B2 to B3 on 24th March 2020. Even last week (Nov 18th), we had raised concerns that Indiabulls Housing Finance has a 4.99% equity stake in beleaguered Lakshmi Vilas Bank, whose shares are going to go down to zero. We re-iterate that you exit your holdings in this company.  

We had alerted users to exit their exposure in IIFL Finance in April this year after Moody’s had warned of downgrading the ratings on the company. Eventually, Moody’s downgraded the Corporate Family Rating of IIFL in September to B2 (from B1). We re-iterate that you reduce your exposure/ exit your investments in the company. 

Invest only in debt funds that have a 100% allocation to AAA-rated papers and a low modified duration. Please find your exposure to these high-risk companies through mutual funds.