Reliance Capital protests after rating agency downgrades debt to 'default'

Debt-laden Reliance Capital Ltd has slammed an Indian credit rating agency's decision to downgrade its debt to "default" levels and warned the move would harm millions of investors.

CARE Ratings late on Friday downgraded the non-banking financial company's (NBFC) bonds to 'D' from 'BB', citing a one-day delay in coupon payments on several non-convertible debentures and stress in the group's liquidity position.

Reliance, headed by business tycoon Anil Ambani, however, said funds had been arranged by the due date and the delay was due to technical glitches in the bank's servers.

CARE "arbitrarily disregarded" the explanation and gave the company no opportunity to comment on the rating rationale, Reliance said in a statement to stock exchanges on Saturday.

"The highly unprofessional, biased and prejudiced and unjustified actions of CARE will precipitate a chain sequence of events that will gravely harm the interests of millions of retail and institutional investors having direct and indirect exposure to securities of the company," it said.

CARE did not respond to requests for comment.

The rating agency's move may exacerbate fears of further stress in India's shadow banking sector, which has faced a liquidity crunch following the collapse of Infrastructure Leasing & Financial Services (IL&FS) a year ago.

PwC resigned as Reliance Capital's auditor in June, citing what it called a lack of information from the company. Reliance Capital said it had duly responded to the auditor's queries.