Rating agency ICRA has cut ratings for Piramal Capital and Housing Finance Ltd's (PCHFL) bonds, term loans and debentures from "AA+" to "AA" on increasing challenge to raise money in risk averse environment.
This impacts the financial flexibility. These challenges stem from the current operating environment and the risk averse sentiment of investors towards non-banks, particularly wholesale-oriented financiers.
PCHFL has witnessed increase in its cost of borrowings, during recent months, along with shortening of tenor for its commercial paper (CP) borrowings, ICRA said in a statement.
The resilience of PCHFL's business model to such external shocks will depend on its ability to raise long term funding and infusion of fresh equity.
The outlook on the long-term rating continues to remain negative due to predominantly wholesale book, with large sized exposures particularly in real estate and infrastructure segment.
ICRA said PCHFL has demonstrated its ability to maintain adequate asset quality. However, a prolonged slowdown in the real estate industry, coupled with the liquidity crunch in the overall market, could have an adverse impact on the same.
The Piramal Group has taken several measures to shore up long-term funding for the financial services business1 having raised long-term funds in excess of Rs 23,700 crore over the past nine months. It has significantly reduced the share of commercial paper in the overall borrowings.
The Group continues to explore fresh funding avenues and is in the process of tying up sizeable amount of funds to support liquidity and future growth.
The ratings favourably factor in PCHFL’s established position and track record in the real estate lending segment, the promoter group’s domain experience given its presence across the industry value chain, the company’s leadership team and the strong systems and processes.