The recent ratings downgrades by several agencies of commercial papers of Infrastructure Leasing & Financial Services (IL&FS) and IL&FS Financial Services Ltd has hit hard several mutual fund houses due to their exposures in crores of rupees in these papers.
Among those hit are: Aditya Birla Mutual Fund, DSP Mutual Fund, Principal Mutual Fund, Kotak Mutual Fund, that have large exposure to the downgraded paper or debentures issued by IL&FS and its subsidiaries.
Among those with the highest exposures are:
As reported by Moneylife last week
, IL&FS defaulted on a short-term loan worth Rs1,000 crore from Small Industries Development Bank of India (SIDBI). At the same time, a subsidiary of IL&FS too has defaulted in repaying a loan worth about Rs500 crore to the development financial institution. Defaulting on short-term loan commitment that too from an infrastructure development and finance company with pan-India presence, is very serious issue.
"The revision in ratings assigned to debt instruments and bank facilities of IL&FS Financial Services due to significant deterioration in the liquidity profile of the company on impending debt servicing obligations in the near future and delay in funding support from the parent group on account of delay in fund raising plans. The rating revision also factors impairment of financial flexibility of the company as IFIN would not be able to access the commercial paper (CP) market for six-month period in line with compliance with the Reserve Bank Commercial Paper Directions, 2017,” the ratings agency says in a statement.
According to the ratings agency, there is deterioration in the financial risk profile of IL&FS as well. It says, “The overall financial risk profile of the parent company-IL&FS has seen weakening on account of group’s elevated leverage levels and moderation in credit profile of key business verticals like energy vertical (housed in IL&FS Energy Development Co Ltd-IEDCL) and engineering vertical (housed in IL&FS Engineering and Construction Co Ltd-IECCL).”
CARE Ratings had earlier downgraded the ratings of IEDCL to ‘CARE BB-; Credit watch with negative implications’ and IECCL to ‘CARE BB; Negative’.
Separately, ratings agency ICRA also downgraded to 'D' from 'C' bank debt of Rapid Metrorail Gurgaon South Ltd (RMGSL) for not making interest payment for August 2018 on time. RMGSL is a special purpose vehicle (SPV) sponsored by IL&FS Rail Ltd (IRL) with 65.0% stake and IL&FS Transportation Networks Ltd (ITNL) with balance stake.
"The revision of RMGSL's rating takes into account the recent irregularities in debt servicing by the company. RMGSL has not paid the interest for the month of August 2018. The company's inability to generate sufficient revenues due to continued weak ridership on the project route had made it highly dependent on timely funding support from promoters. However, the promoter has not made available the required funds. As per the RMGSL's management, the company has represented to Haryana Urban Development Authority (HUDA) for claims due to breach of provisions of the Concession Agreement," ICRA has said.
Total cost of the project was funded by a combination of debt of Rs1,500 crore and equity. The entire term loan of Rs1,500 crore has been sanctioned by a consortium of five banks with Canara Bank as the lead bank and an external commercial borrowing (ECB) loan. The project started commercial operations on 31 March 2017.