CARE Rating downgrades SREI Infra Finance's long term ratings

Falling asset quality triggers rating review

Rating agency CARE Ratings has downgraded ratings for Kolkata-based SREI Infrastructure Finance Ltd’s (SIFL) long term bonds and debentures on rise in non-performing assets (NPAs) and restructured assets.

The rating for long term infrastructure bonds have been cut from “AA-“ to “A+” and unsecured bonds from “AA-“ to “A”, CARE Rating said in statement. The total long term bank facilities under rating are Rs 11,933 crore.

The rating revision takes into account subdued environment in the Indian economy especially in the infrastructure space, which has resulted in deterioration in asset quality of the company marked by rise in NPAs and restructured assets, CARE said.

SIFL posted Profit After tax of Rs 90.9 crore on a total income of Rs.1900.0 crore in year ended March 2015 (FY15). It had posted PAT of Rs 59.30 crore on total income of Rs 1,805.9 crore in FY14.

Overall Capital Adequacy Ratio (CAR) was 16.97% as on March 31, 2015.

In FY15 SREI’s Gross NPA ratio deteriorated to 6.62% from 3.53% in March 2014. Also the net NPAs went up to 5.51% from 3.09% in March 2014.

The standard restructured assets outstanding also increased to Rs 248.70 crore in March 2015 from Rs 22.5 crore as on Mar 31, 2014. Furthermore, in Q1FY16 9June 2015, SIFL reported a PAT of Rs 22.91 crore on a total income of Rs.476.28 crore.

Rating action also factors in SIFL’s continued high exposure in group companies and strategic investments, majority of which are in the infrastructure space. These investments are yet to be divested/diluted to yield commensurate returns, high client concentration and low profitability.

However the ratings continue to draw strength from the satisfactory track record of the company with ‘Infrastructure Finance Company’ status from RBI, established experience of the promoter group with prominent position in infrastructure financing space, CARE said.

Further, such ratings takes note of likely liquidation of its investment in VIOM Networks Ltd. Ability of the company to improve its asset quality & profitability, reduce client concentration and group exposure and maintaining capital adequacy would remain the key rating sensitivities.