Shares of YES Bank and Reliance Capital fell 5 per cent each in the intra-day on Monday to trade close to their respective 52-week low price on the BSE in an otherwise range-bound market. In comparison, the S&P BSE Sensex was marginally higher by 0.07 per cent at 37,487 levels at 11:31 am.
Reliance Capital (RCap) slipped 5 per cent to Rs 112 apiece to quote close to its 52-week low of Rs 107 hit on February 7, 2019 in intra-day trade. The stock of Anil Ambani-promoted finance company has been under pressure, falling 39 per cent in the past one month, against a 3 per cent decline in the benchmark index.
The fall comes after a slew of rating downgrades by various rating agencies. Brickwork Ratings (Brickwork) on May 4, 2019 revised the ratings of various existing debt instruments of RCap and continued with the 'credit watch' rating with negative implications.
The revision factored in the deterioration in liquidity profile of the group due to challenges faced by RCap and its key lending subsidiaries, Reliance Commercial Finance Limited (RCF) and Reliance Home Finance (RHF), to raise funds through traditional bank lines and debt market instruments.
“The downgrade is driven by low visibility in raising funds, thereby increasing the risk of delays in timely servicing of debt obligations, given the large amounts due for repayment in RCap over the next two months. RCap has repayment obligations of around Rs 1,060 crore due in May 2019 and around Rs 750 crore due in June 2019,” it said in the rating rationale.
Similarly, YES Bank, too, slipped 5 per cent to Rs 156 on the BSE in intra-day trade to quote close to its 52-week low of Rs 147 touched on November 29, 2018. In past one month, the stock has plunged 42 per cent.
In the past nine trading days, the stock has tanked 34 per cent from the level of Rs 237 - touched on April 26 - after the bank posted its first ever net loss of Rs 1,506 crore for the March quarter (Q4FY19). The surprise net loss was incurred after provisions soared over nine times. It had posted a profit of Rs 1,179 crore in the year-ago period.
CARE Ratings, India Ratings and Research (Ind-Ra) and Brickwork Ratings last week downgraded outstanding ratings of the private sector lender which factored in the bank’s weak financial performance as of Q4 and FY19, increased levels of non-performing assets (NPA), higher slippages, especially in Q4, increased provisions and its impact on net profits and capital adequacy ratios.
CARE Ratings attributed the ‘negative’ outlook to weakening of core capital buffers to absorb credit costs and deterioration in the credit profile of its advances portfolio.
"The outlook may be revised to ‘stable’ if the bank is able to bring about timely resolution of the identified assets and improve its asset quality parameters along with improvement in its core capitalisation levels," it added.