CARE lowers Reliance Capital’s creditworthiness

Mumbai: Rating company CARE over the weekend cut by a few notches the creditworthiness of Reliance Capital Ltd (RCL), the diversified financial services company owned by Anil Ambani, citing reduced fund raising ability amid defaults by RCL’s subsidiaries.

Reliance Capital is now rated triple-B, revised down from single A for three sets of debt instruments: Long-term debt, subordinated debt and market-linked debentures.

“The revision in the ratings of RCL factors in the recent developments including default by its subsidiaries ‘Reliance Home Finance Limited’ (RHFL) and ‘Reliance Commercial Finance Limited’ (RCFL), which is expected to further reduce the group’s financial flexibility and diminish RCL’s ability to raise funds from the markets,” CARE Ratings said in a statement.

According to the rating company, RCL’s financial risk profile is characterized by depletion of liquidity, high dependence on planned disinvestments for debt servicing, and delays in fructification of such disinvestments.

Earlier in March, Reliance Cap planned to reduce debt by monetising stakes in mutual fund, general insurance and media assets. The company was expected to raise Rs 5,000 crore by selling stake in the mutual fund company.

It aimed to cut debt by Rs 10,000-12,000 crore in the next 3-4 months by monetising its entire 43 per cent stake in Reliance Nippon Life Asset Management, selling 49 per cent in Reliance General Insurance and other media assets, it had said in a statement two months ago.

In April, RHFL and RCFL, two subsidiary companies were swamped by credit rating downgrades. Both are now seeking to raise funds through the sale of fresh equity as the holding company Reliance Capital is willing to cede ownership to new investors at the right price, ET reported on April 30.

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Cash availability remains a major problem.

Cash and bank balances stood reduced to Rs 47 crore as on April 30, 2019, CARE said.

“Apart from this, RCL did not have any liquid investments or unutilized committed lines, which further constrain its liquidity position,” it said.


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