Duff & Phelps Scales Down Jenson Fd

Duff & Phelps Credit Rating India Pvt Ltd has downgraded the fixed deposit rating of Jenson & Nicholson Financial Services Ltd (JNFSL) from Ind BBB+ (FD) to Ind B (FD).

The revised rating of Ind B (FD) assigned to the fixed deposit programme of JNFSL indicates below investment grade and processing risk that obligations will not be met when due.

Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in the rating within this category or into a lower rating grade. According to a DCR India press release, JNFSL has shown a steep fall in profit after tax to Rs 0.28 million in the financial year 1997-1998 as compared to Rs 8.6 million in the financial year 1996-97 on a marginally increased income base.

 

Despite its total borrowings falling by 6 per cent last year, the interest expense has increased by 25 per cent during the year. This was on account of the comparatively high cost of mobilising fixed deposits.

Net spreads have also declined steadily from 3.7 per cent in 1995-96 to 1.9 per cent in 1996-97 to 1.15 per cent in 1997-98. The company also had to make higher level of provisions in the last financial year which has significantly affected its profitability, the release added.

Outstanding deposits as on March 31, 1998, constituted 45 per cent of the total capital employed. However, JNFSL has of late stopped collecting fresh deposits from the market as well as renewal of existing deposits. The company has also been exploring for quite some time, various options of infusing long term funds in the company. Given the tight money market conditions, its efforts are yet to yield any tangible results.