Fitch undertakes ratings review of four India NBFIs

Fitch Ratings has taken rating action on the Long-Term Issuer Default Ratings (IDR) of four Indian non-bank financial institutions (NBFI) in light of the companies' performance amid the coronavirus pandemic. The rating actions are as follows:

- IIFL Finance 'B+' rating maintained on Rating Watch Negative (RWN)

- Manappuram Finance (MFIN), affirmed at 'BB-'; RWN removed; Outlook Stable

- Muthoot Finance (MFL), affirmed at 'BB'; RWN removed; Outlook Stable

- Shriram Transport Finance Company (STFC), affirmed at 'BB'; RWN removed; Outlook Negative

The RWNs on the bond ratings of MFIN, MFL and STFC have also been removed.

The companies' Long-Term IDRs were placed on RWN in March this year, as Fitch expected the pandemic to present further macroeconomic and funding challenges for the entities, heightening downside risk to their credit profiles.

IIFL Finance's rating remains on RWN due to continued uncertainty on its funding and liquidity, with trends potentially becoming more evident within the next six months. This is despite a steady improvement in collections over the past few months and easing funding conditions, which have partly benefited from government support measures for NBFIs and other parts of the economy.

The removal of the RWN and Stable Outlooks on MFIN and MFL's ratings reflect the entities' generally resilient performance in the face of significant economic disruption amid local measures to contain the pandemic.

The RWN on STFC's ratings has been removed, as we believe near-term operational uncertainty is easing for the entity. However, the Negative Outlook highlights the ongoing downside risk to asset quality and the implication for the company's funding and liquidity, which we expect will only become apparent in the medium term.

The ratings on the entities' medium-term note (MTN) programmes and foreign-currency senior debt are at the same level as the Long-Term Foreign-Currency IDRs, while STFC's rupee-denominated senior debt is rated at same level as its Long-Term Local-Currency IDR in accordance with Fitch's rating criteria.

Fitch has assigned a Recovery Rating of 'RR4' to IIFL Finance's senior secured debt in accordance with Fitch's criteria for entities with a Long-Term IDR of 'B+' or below. The Recovery Rating reflects Fitch's expectation for 'Average' recovery prospects for noteholders in the event of a default.

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