Care Reaffirms Sidbi Fd Ratings

Credit rating agency CARE today reaffirmed the triple-A (AAA) rating of fixed deposits and bond programmes of Small Industries Development Bank of India (Sidbi) in sharp contrast to Crisil's downgrading of Sidbi bond issue to double-A (AA) a couple of months back.

Care today reaffirmed the 'AAA(FD)' rating assigned by it to the Rs 100 crore fixed deposit programme and the 'AAA' rating assigned to the Rs 1,442 crore twin bond programme of Sidbi).

Crisil had on July 17 downgraded Sidbi's bond issues and the FD programme.

The 'AAA' rating indicates best quality and high investment grade of the financial instruments issued by the Sidbi. The rating agency has also assigned a 'AAA' rating to the unsecured borrowing programme of Sidbi for raising Rs 878 crore.

 

CARE said the reaffirmation of Sidbi's ratings for the Rs 300 crore bond issue (series I), priority sector bonds (Rs 1,142 crore) and the FD programme reflects its (Sidbi's) role as the apex financial institution for the small scale sector, its strong financial position, high capital adequacy (28.12 per cent and entirely Tier I based), comfortable liquidity, its favourable resource profile comprising cheap and long-term sources of funds and support received from the government and the Reserve Bank of India.

The rating agency pointed out that over 45 per cent of the Sidbi's outstanding loans are to state financial corporations (SFCs) and the state industrial development corporations (SIDCs) and that the health of many of them is not very good. However, Sidbi has been reducing its exposure to the weaker primary lending institutions, Care added.

Crisil had removed the 'AAA' rating assigned by it to the outstanding bond issues of Sidbi from rating watch with negative implications and downgraded it to 'AA'. The 'FAAA' rating assigned by the agency to Sidbi's FD programme was also removed from rating watch with negative implications, pending further clarity on the change in the shareholding pattern of Sidbi from its 100 per cent ownership by IDBI.

It further reasoned that the Sidbi's rating revision reflects the reduced quality of government ownership as well as increasing concerns regarding the likely impact on it of the deteriorating performance of SFCs and SIDCs. Crisil, however, added that mitigating these concerns were Sidbi's very strong capital adequacy position and healthy profitability.