These ratings agencies are as useless as they come. The role of a rating agency is to monitor the companies they rate and provide advance warning if something is about go wrong. But no…that’s not their style. In the past 6-7 months they have been caught with their pants down multiple times and yet they never seem to learn.
It started with IL&FS. ICRA downgraded IL&FS 9 fricking notches on Sep 8, 2018. I mean, from investment grade to default. How in the fuck does that happen?
They were again caught with their pants down with ZEEL and this time with DHFL.
The most epic display of ineptitude was the role they played in the 2008 subprime mortgage crisis. Here’s a refresher.
Anyway, here is the debt that is being downgraded.
| Instruments/Facilities | Amount (Rs. crore) | Ratings1 | Rating Action |
| Non-Convertible Debentures | 17,655.12 | CARE AA+ (Double A Plus) (Credit watch with developing implications) | Revised from CARE AAA; Stable (Triple A; Outlook: Stable); placed on credit watch with developing implications |
| Subordinated Debt | 2,205 | CARE AA (Double A) (Credit watch with developing implications) | Revised from CARE AA+; Stable (Double A Plus; Outlook: Stable); placed on credit watch with developing implications |
| Perpetual Debt | 1,300 | CARE AA- (Double A Minus) (Credit watch with developing implications) | Revised from CARE AA; Stable (Double A; Outlook: Stable); placed on credit watch with developing implications |
| Non-Convertible Debentures (Public Issue) | 29,000 | CARE AA+ (Double A Plus) (Credit watch with developing implications) | Revised from CARE AAA; Stable (Triple A; Outlook: Stable); placed on credit watch with developing implications |
| Non-convertible Redeemable Cumulative Preference share | 750 | CARE AA (RPS) [Double A (Redeemable Preference Shares)] (Credit watch with developing implications) | Revised from CARE AA+(RPS) (Double A Plus (Redeemable Preference Shares); Outlook: Stable); placed on credit watch with developing implications |
| Fixed Deposit Programme | 20,000 | CARE AA+ (FD) [Double A Plus (Fixed Deposit)] (Credit watch with developing implications) | Revised from CARE AAA (FD); Stable [Triple A (Fixed Deposit); Outlook Stable]; placed on credit watch with developing implications |
| Long term Bank Facilities | 42,713.80 | CARE AA+ (Double A Plus) (Credit watch with developing implications) | Revised from CARE AAA; Stable (Triple A; Outlook: Stable); placed on credit watch with developing implications |
| Commercial Paper Issue | 8,000 (reduced from 15,000) | CARE A1+ (A One Plus) (Credit watch with developing implications) | Placed on credit watch with developing implications |
| Total | 1,21,623.92 (Rupees one lakh twenty one thousand and six hundred and twenty three crore and ninety two lakh only) |
An important passage from the press release on the liquidity situation:
Liquidity profile
“As on December 31, the liquidity statement (excluding unutilized working capital lines & fixed deposit renewals) showed positive cumulative mismatch of Rs.5,954 crore in the short term bucket of up to 1 year. Further, from September 24, to December 31, 2018, has received amount of Rs.11,875 crore through various securitization deals, which enabled the company to bridge mismatches in short term buckets. Further, during the same period company raised another amount of Rs.2,750 crore through NCDs, Rs.575 crore through CPs, Rs.500 crore bank borrowing, Rs.402 crore through FDs, which is expected to enable the company in bridging the probable mismatches. The company’s reliance on Commercial Paper (CP) borrowing has reduced considerably and current CP outstanding stood at Rs.950 crore, which is less than 1% of total borrowings. As on December 31, 2018, the company had free Cash and Liquid Investments (excluding SLR) worth Rs.3,967 crore. Further, as on January 31, 2019, the company had liquidity worth ~ Rs.6,500 crore (including SLR)”