Indostar Cap succeeded after 3 years amid investigation

The results come at a time when the non-banking finance company (NBFC) is facing a rating downgrade after its auditors raised doubts about its ability to continue as an ongoing concern. In a press release, Indostar said it has made efforts to de-stress in the commercial vehicle segment. Collections improved during the quarter 1,312 crores, with a gross collection efficiency of 181%. The company also said that it has made provisions against the stressed commercial vehicle segment.

“During the quarter, the Company made concerted efforts to reduce the stress book by driving customer settlements and selling 50% of stress books to ARC. The stress book is 5% of AUM as on June 30, 2022,” it said. “We have strengthened controls, review policies and advanced technology across the spectrum of loan origination, credit appraisal, disbursement, debt management and collection processes.”

Indostar’s capital adequacy stood at 29% at the end of June quarter. Gross non-performing assets rose to 8.2% at the end of June, as against 15.5% at the end of March.

NBFCs had seen a rise in their NPAs mainly due to lack of control 1,381 crore stressed CV portfolio, where the restructuring took place without following its internal or RBI policies, and the impact of COVID-19 on its borrowers.

In a recent Qualified Opinion on IndoStar Capital’s annual accounts, statutory auditors Deloitte Haskins & Sales LLP said that its liabilities have exceeded total assets maturing within 12 months. 2,206 crore, and for some of the borrowings, gross NPAs and net NPAs were exceeded.

Following this, rating agency CARE Ratings last week downgraded the rating of NBFCs on long-term instruments from AA- to A+. On Saturday, Crisil also downgraded the rating to negative clock with negative implications.

first article