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After a legal tussle, India Ratings (formerly Fitch Ratings India) has disclosed a March 2012 downgrade of SREI Infrastructure Finance’s national ratings. This announcement has been made pursuant to the order dated September 17 by the Calcutta High Court and the letter from market regulator SEBI on October 5.
This disclosure has not gone down well with the company, which plans to approach the court again. The company’s Chief Operating Officer, Shashi Bhushan Tiwari, said: “Fitch has acted in haste and their view is based on inaccurate conjecture. We are going to represent this matter to the Calcutta High Court.”
Meanwhile, the rating agency announced that on March 19, 2012 it had downgraded Srei Infrastructure Finance Limited’s (Srei Infra) national long-term rating to ‘IND A+’ from ‘IND AA-’ and national short-term rating to ‘IND A1’ from ‘IND A1+’.
No information shared
“The outlook on the national long-term rating at the time of the downgrade was ‘Negative’. Meanwhile, the agency is unable to comment on the present rating level given that no information has been shared by Srei Infra post the last review,” it clarified.
The High Court order and SEBI’s letter confirmed that the action by India Ratings generally conforms to the SEBI (Credit Rating Agencies) Regulations, 1999. According to the court’s order, India Ratings is no longer constrained from publishing the decision of the rating committee held on March 19, 2012.
It also said that since March this year, Srei Infra has not shared any information with the rating agency. This is despite the statutory obligation on Srei Infra to share information with the rating agency under the requirements of the SEBI Regulations Act relating to the issue and listing of debt securities.
‘Caution recommended’
The agency said: “Given the lack of adequate public information, India Ratings may be unable to review the ratings in the future.” Investor caution is, therefore, recommended, given that the negative outlook implies potential for a further rating downgrade, it advised.
It said that the rating downgrade and negative outlook reflect elevated credit risk in Srei Infra’s loans due to its largely unseasoned portfolio resulting from its continuous high loan growth, especially in the financial year ended March 2011 and nine months of 2011-12. Also, a large proportion of Srei Infra’s equity is locked up in unlisted investments, leaving the company with limited capital to cushion losses from elevated loans in the event of stress, it explained.
The company’s share (on the BSE) ended at Rs 27.30, with loss of over 5 per cent on October 5.
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