ICRA downgrades Edelweiss Debentures on wholesale loan book's vulnerability

The ability of non-banks like Edelweiss to mobilise resources at adequate rates is expected to remain constrained over the near to medium term in the current operating environment

Rating agency ICRA has downgraded debentures of Edelweiss Financial Services from "AA" to "AA-" on increased vulnerability in its wholesale lending book and risks of rise in the stressed exposures.

The outlook on debentures remains negative, ICRA said in a statement.

Rating takes into account heightened risks from the underlying assets, comprising real estate and structured debt transactions across sectors. The book is largely untested given the principal moratorium and bullet repayment structure in a significant quantum of the loans. 

The financial flexibility of the underlying borrowers is constrained due to a slowdown in their core operations and their (borrowers) leveraged capital structure