S&P downgrades four Indian NBFCs on weakening economic conditions
Jun 27, 2020
Singapore, June 27 : S&P Global Ratings has downgraded ratings on four Indian finance companies on weak economic conditions due to Covid-19 and affirmed ratings on two others.
Shriram Transport Finance's rating has been downgraded from BB to BB-negative, Bajaj Finance's from BBB-negative to BB-plus, Manappuram Finance's from BB-negative to B-plus and Power Finance Corporation's from BBB-negative to BB-plus.
At the same time, S&P has affirmed BB-plus rating to Hero FinCorp and BB to Muthoot Finance.
S&P said it believes worsening operating conditions following Covid-19 have increased risks for financial institutions operating in India. It expects a recession to hurt the financial sector.
"We expect the asset quality of Indian finance companies to deteriorate, credit costs to rise and profitability to decline over the next 12 months. Given the large acceptance of moratorium by borrowers, funding and liquidity problems could worsen for these companies."
S&P placed the ratings on Shriram Transport Finance on credit watch with negative implications. The outlook on Muthoot is negative while it is stable for the other non-banking finance companies, it said.
Recently, S&P forecast a 5 per cent contraction in India's economy during the current fiscal ending March 2021.
