Rating firms eye Indostar’s first quarter earnings

According to the two people, the company’s first quarter report before the rating agencies and lenders to review its credit rating and loan disbursements after Indostar Capital Finance’s ability to continue as a going concern was questioned by the statutory auditors. Eagerly waiting for the results. ,

The non-banking financial company may declare its results on Sunday. Last week, in a qualified opinion on Indostar Capital’s annual accounts, statutory auditors Deloitte Haskins & Sales LLP said its total liabilities exceeded total assets maturing within 12 months. 2,206 crore, and for some of the borrowings, gross non-performing assets (NPAs) and net NPAs were exceeded.

CRISIL and ICRA in May put NBFC ratings on “watch” with “developing” and negative “impacts” respectively, while CARE Ratings downgraded its long-term instrument from AA- to A+.

In an August 9 report, CARE Ratings said that IndoStar’s gross non-performing accounts touched 15.5 per cent as on March 31, as against 4.4% a year ago, while net NPAs from 3.8 per cent during the period under consideration to 8.3 per cent. percentage was reached.

Increase in NPAs was mainly due to deficiencies in its control Care Ratings said in the report, 1,381 crore stressed commercial vehicle (CV) portfolio, where it underwent restructuring without complying with its internal or RBI policies and impact of Kovid-19.

Meanwhile, the company’s management assured that the total amount of NPAs has come down till June 30. 516 cr from its stressed loan pool of NPAs 1,381 crore to an Asset Reconstruction Company (ARC). According to the data shared by CARE, the company has written off 369 crore and collected 94 crore by June, which is likely to reduce the CV stress pool to approx. 401 crores.

“Given the data available with us, it does not appear that the financial position of IndoStar is a cause for concern. Thanks to the support of its promoter Brookfield, the company will be able to overcome the current crisis,” said one of the two people, a credit rating officer, who sought anonymity.

That said, the non-bank lender’s financial position remains weak with IndoStar reporting losses over the past three years. Its operating loss widened 896 crore in FY22, which increased due to sharp increase in credit cost 1,158 crores.

“While management expects future earnings to benefit from the write-back, CARE believes total earnings will remain relatively low in the near-term as a significant increase in the debt book amid tightening of its risk controls and potential growth. It will take time to restore growth. in funding costs,” Care added.

However, rating agencies are relieved of the support extended by Brookfield. In June, Brookfield held a 56% stake in IndoStar. the group had invested 1,225 crores to become the largest shareholder and co-promoter in the company in May 2020.

According to CARE Ratings, Brookfield has been actively involved in managing the day-to-day operations of IndoStar since January. It promoted Deep Jaggi, chief business officer of Indostar, to chief executive officer in January.

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