Rating agency CRISIL has downgraded rating on Infrastructure Development Finance Company’s (IDFC) non-convertible debentures to ‘AA+/Stable’ from ‘AAA/Stable’ due to delay in capital raising plans.
The institution’s capitalisation is likely to remain short of earlier expectations, and well below the levels that supported the earlier rating. IDFC is unlikely to raise fresh equity capital in the near term, CRISIL said in a statement. It also withdrew ‘P1+’ rating for IDFC’s short-term debt programme.
The delay in capital infusion, in combination with increased disbursements, will result in a reduction in IDFC’s capitalisation ratios over the medium term. Despite this decline, however, the institution’s capitalisation is expected to remain adequate to support the rating at a high-safety level.
Earlier ratings on IDFC were based on an expectation that internal accruals and capital infusion would help infrastructure finance company to strengthen and maintain its Tier I capital adequacy ratio (CAR) well in excess of 20 per cent over the medium term.
Though a cautious growth strategy has helped IDFC maintain its current Tier I CAR at just above 20 per cent (20.04 per cent as on March 31, 2009), CRISIL believes that the delay in capital-raising will strain IDFC’s capitalisation over the medium term.
Also, given the Government’s infrastructure investment thrust, significant opportunities for providing finance in the infrastructure domain are expected in the next few years. In such a scenario, IDFC is likely to accelerate lending in an effort to maintain its market position in this segment.
IDFC stock was trading at Rs 133.60, down 4.46 per cent from previous close of Rs 140.15 on Bombay Stock Exchange(BSE).
