Indiabulls Housing Finance (IBHFL) shares fell 3.8 percent intraday on July 16 as CRISIL revised its rating outlook on the company’s long-term facilities to ‘rating watch with negative implications’.
The rating agency revised its rating watch on the long term bank facilities and debt instruments from ‘rating watch with developing implications’, but the rating on the short term bank facilities and the short-term debt programme was reaffirmed at ‘A1+’, CRISIL said.
Total bank loan facilities covered under rating stood at Rs 24,549.98 crore.
CRISIL said it had placed its ratings on long-term debt instruments of IBHFL, on ‘watch with developing implications’ on April 10, 2019, after the company announced its scheme of amalgamation with Lakshmi Vilas Bank (LVB).
IBHFL has received the approval from the Competition Commission of India (CCI) for the proposed merger, while it awaits other regulatory approvals.
CRISIL said with progress on the merger, the rating watch has been revised to ‘watch with negative implications’ as it is possible that the credit profile of the merged entity as a bank could be relatively weaker than other AAA-rated private banks, at least in the short term.
“There could be transitional challenges once the merger goes through as the entity would need to establish its liabilities franchise to compete effectively with existing banks. Further, while IBHFL today has a strong market position in the housing finance company (HFC) space and is among the larger HFCs, on conversion to a bank ‘ it will be a relatively mid-sized bank,” it added.
The agency said it would resolve the rating watch and take a final rating action once there is clarity on the regulator’s stance on the proposed merger, and also when CRISIL has detailed information on the organisational structure and business strategy of the merged entity.
CRISIL further said the ratings continue to reflect its expectation that IBHFL will maintain a strong trajectory in business volume in retail mortgage finance.
“The company shall maintain focus on increasing the share of retail housing loans and reinforce its market position in this space. The rating also factors in IBHFL’s healthy asset quality, robust capitalisation, strong profitability, healthy cover for asset-side risks, and sufficient liquidity. IBHFL is currently one of the largest and most profitable non-bank lenders in India,” it added.
The stock was quoting at Rs 618, down Rs 20.30, or 3.18 percent on the BSE at 0926 hours IST.