Reliance Capital tumbles after rating downgrade

Reliance Capital fell 10.54% to Rs 135.75 at 14:41 IST on BSE after CARE Ratings and Brickwork Ratings downgraded credit rating of long-term debt program of the company.

Meanwhile, the S&P BSE Sensex was down 420.67 points, or 1.07% to 38,719.61.

On the BSE, 27.66 lakh shares were traded in the counter so far compared with average daily volumes of 11.19 lakh shares in the past two weeks. The stock had hit a high of Rs 148 and a low of Rs 131.60 so far during the day. The stock hit a 52-week high of Rs 487.60 on 3 September 2018. The stock hit a 52-week low of Rs 107 on 7 February 2019.

Reliance Capital announced on Friday, 19 April 2019, that CARE Ratings (CARE) has revised its rating to A (credit watch with developing implications) for long-term debt programme, market linked debentures and subordinated debt of the company. CARE has stated this action is primarily due to extension of timeline for progress of planned divestments in various companies.

Moreover, the Brickwork Ratings (Brickwork) has revised rating to A+ (credit watch with negative implications) for long-term debt program, market linked debentures and subordinated debt of the company. Brickwork has stated this action is primarily due to extension of timeline for progress of planned disinvestments in various companies.

Reliance Capital said it considers the above rating action completely unjustified and inappropriate. There has not been any adverse change in the company's operational parameters from the time of the last rating action.

The company added that it has been working diligently to ensure timely debt repayments and the company's asset monetization plan is on track.

As publicly informed, the company is in the process of monetising its entire 42.88% stake in Reliance Nippon Life Asset Management, which at current market price is valued at over Rs 5,000 crore. The company expects to realise a premium on this monetisation.

The company has also announced its plans to monetise 49% stake in Reliance General Insurance Company (which is presently 100% owned), and the DRHP has recently been filed with Sebi. In addition, the company is at an advanced stage of monetisation of several of its non-core investments.

Based on the above, the company expects to realise minimum proceeds of ~over Rs 10,000 crore, and sharply cut its overall debt by more than 50%.

The rating agency unfortunately and repeatedly has not taken any of these material and positive factors into consideration, and has instead mechanically revised the rating as above, resulting in an unwarranted and uncalled, ill-timed rating action, the company said in its statement.

On a consolidated basis, net profit of Reliance Capital rose 3450% to Rs 213 crore on 6.73% decline in total income to Rs 5057 crore in Q3 December 2018 over Q3 December 2017.

Reliance Capital has interests in asset management and mutual funds; life, general and health insurance; commercial & home finance; equities and commodities broking; wealth management services; distribution of financial products; asset reconstruction; proprietary investments and other activities in financial services.

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