SREI Infra tumbles after credit rating downgrade

SREI Infrastructure Finance fell 8.65% to Rs 12.04 after Brickwork Ratings downgraded the ratings for the non-convertible debentures, perpetual debt instrument and commercial paper programme aggregating to Rs 5,327.07 crore.

The finance company has informed that its long-term secured non-convertible debentures (NCDs) worth Rs 2,800.66 crore was rated 'BWR A+/Negative' from 'BWR AA/Negative'. Long-term unsecured non-convertible debentures (NCDs) worth Rs 1,426.41 crore was rated 'BWR A+/Negative' from 'BWR AA/Negative'. Long-term issuer rating was downgraded to 'BWR A+/Negative' from 'BWR AA/Negative'. (Perpetual) IPDI worth Rs 100 crore was downgraded to 'BWR BBB+/Negative' from BWR A+/Negative' and short-term commercial papers worth Rs 1,000 crore was rated 'BWR A1' from 'BWR A1+'. The announcement was made after trading hours yesterday, 11 September 2019.

Brickwork Ratings stated that the rating of SREI Infrastructure Finance (SIFL) were downgraded considering the decreasing asset base, weak asset quality due to weak credit profile of the portfolio, significant decrease in profitability in Q1FY20 due to increasing interest cost and higher provisions, declining capital adequacy ratio, continued high gearing against an expectation of significant reduction in gearing through capital infusion and liquidity stress faced by NBFC sector affecting the borrowing capacity of the company.

However, the rating continues to derive comfort from the experience of the promoter group in the line of infrastructure financing and equipment financing businesses, established market position and brand name and adequate liquidity profile.

The outlook continues to be negative considering the risk of further weakening of asset quality, declining profitability and AUM and to monitor the ability of SIFL to borrow for continued growth while maintaining its cost of funds and profit margins. The ability to reduce its gearing is also a key monitorable.

Shares of SREI Infrastructure Finance jumped 23.63% in the past four trading sessions to settle at Rs 13.18 yesterday, 11 September 2019, from its close of Rs 10.66 on 4 September 2019.

On BSE, 50,000 shares were traded in SREI Infrastructure Finance counter, compared to a 2-week average of 54,000 shares. The stock hit an intraday high of Rs 14.10 and an intraday low of Rs 11.77.

It hit a 52-week high of Rs 50.75 on 12 September 2018 and a 52-week low of Rs 9.58 on 23 August 2019.

SREI Infrastructure Finance's consolidated net profit fell 69.4% to Rs 42.69 crore on a 2.2% increase in total income to Rs 1,582.58 crore in Q1 June 2019 compared with Q1 June 2018.

SREI Infrastructure Finance is an infrastructure finance company.

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