Icra cuts Janalakshmi Financial's outlook to negative

Rating agency Icra today cut the long term rating outlook of Janalakshmi Financial Services to negative from stable due to deterioration of its collection efficiency after demonetisation.
It reaffirmed the A+ rating for the Rs 1,300 crore long term bank facilities, Rs 3,966 crore non-convertible debenture programme and Rs 751 crore subordinated debt programme of the microfinancier.
The rating agency also reaffirmed the rating of A1+ to the Rs 900 crore commercial paper programme of the company.
"The revision in outlook factors in the adverse impact of demonetisation on JFSL's asset quality with overall collections efficiency affected by the limited currency supply, disruption in borrower cash flows, and political intervention in certain states namely, Uttar Pradesh, Maharashtra and Madhya Pradesh," the rating agency said in a note today.

The company's collection efficiency dipped from about 98 per cent in September 2016 to 78 per cent in January 2017.
Consequently, it's 30+ dpd (days past due) and 60+ dpd increased from 1 per cent and 0.7 per cent respectively as on September 30, 2016 to 12.9 per cent and 1.3 per cent as on December 31, 2016 and further to 22.6 per cent and 11 per cent as on January 31, 2017.

It said while some states, namely Uttar Pradesh and Rajasthan, witnessed a marginal reduction in overdues post December 2016, Tamil Nadu and West Bengal, which constituted 25.2 per cent of the total portfolio as on January 31, 2017 registered a sharp decline in collection efficiency post December 2016.

Icra said the company may have to provide for loan losses for some of the delinquent loans, which would exert pressure on the capitalisation and profitability in the near term.
The extent of the impact on the company's overall credit risk profile would be a key rating consideration in the near term, it said.