- Moody’s Investors Service on Monday placed ratings of two non-banking financial companies (NBFCs) – Hero FinCorp Ltd and India Infoline Finance Ltd (IIFL) – under review for downgrade, citing disruptions to the economy due to covid-19 outbreak and its impact on the NBFC sector.
- While Hero FinCorp’s local and foreign currency issuer rating was placed under review, IIFL’s corporate family rating (CFR), foreign and local currency senior secured MTN program ratings, and senior unsecured debt rating were placed under review. That apart, Muthoot Finance Ltd’s CFR was affirmed and its outlook changed to negative from stable.
- Also, deteriorating global economic outlook, volatile oil prices, and asset price declines have added to the foe across many sectors, regions and markets.
- According to Moody’s, Indian NBFCs have been hit because of disruptions to domestic economic activity from the coronavirus outbreak and that will impact their credit profiles. The rating actions, Moody’s said, reflects the impact on Hero FinCorp, IIFL, and Muthoot of the breadth and severity of the shock, and the deterioration in credit quality it has triggered.
- The rating agency believes that Reserve Bank of India’s (RBI) three-month moratorium will slow the pace at which loan balances are reduced, or even foreclosed on. This, in turn, will result in some loans performing more poorly than they otherwise would have, it said.
- Moody’s also adds that the negative effects of the RBI’s measures are likely to be significantly offset by the positive macroeconomic effects resulting from the stimulus due to the loan repayment moratorium, which is designed to boost consumer confidence and spending.
- However, during the loan moratorium period, the liquidity of the three companies will worsen as loan collections decline, the rating agency said.
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