Money & Banking

Stake-sales: Reliance Cap aims to raise ₹10,000 cr by June-end

Surabhi Mumbai | Updated on April 29, 2019 Published on April 29, 2019

Rating agencies have gone overboard in downgrading companies, says CFO

Reliance Capital plans to raise at least ₹10,000 crore by June-end by divesting stake in Reliance General Insurance and Reliance Nippon Asset Management Company. It will also monetise investments in other firms.

Reliance Home Finance (RHFL) and Reliance Commercial Finance (RCFL) are also in talks with private equity firms, international investors and home finance companies to infuse equity into the business and take majority control.

While discussions are still ongoing on whether to bring in a strategic partner or float an initial public offer to sell 49 per cent stake in Reliance General Insurance, Amit Bapna, Chief Financial Officer, Reliance Capital, said an announcement on RNAM is expected in the next two to three weeks.

Entertainment business

It is also looking to monetise investments in media and entertainment businesses in gaming company Codemasters, and Prime Focus.

“With this, we will deleverage our business by 60 per cent to 70 per cent,” said Bapna. The move follows rating downgrades by ICRA and CARE Ratings. CARE Ratings downgraded the long-term bank facilities worth ₹12,700 crore of RCFL to Care D from CARE BBB+, while ICRA cut RHFL’s commercial paper programme to A4 from A2 earlier.

Rating agencies have gone overboard in downgrading everyone in the industry, said Bapna, adding that there is no need to keep changing ratings when the fundamentals of the business have not changed.

The “minor delay” in repayment on principal repayments of ₹477 crore is likely to be cleared this quarter, and the firms do not foresee any delay in other payments.

Once the payments and banking facilities are regularised by the end of the quarters, the firms will seek a review from the ratings agencies.

“May is a light month for repayments, which can be managed by cash flows from EMIs and securitisation,” said Bapna.

Mutual funds, including Reliance Mutual Funds, UTI and SBI Mutual Fund, have an exposure of ₹2,600 crore to the firms.

“NAVs could be impacted marginally, but it is not a default,” he said, stressing that it should not be compared to situations like IL&FS and Essel.

“Post-September 2018 after the IL&FS issue, there has been a lot of inaction by banks to lend to home finance companies,” said Ravindra Sudhalkar, Executive Director and CEO, RHFL, adding that it has securitised close to ₹5,500 crore after October 1, 2018.

“It has been a similar story for commercial finance. We have securitised ₹2,200 crore of our portfolio,” said Ravindra Rao, Director, RCFL.

The net worth of RHFL is ₹1,800 crore and that of RCFL is ₹2,700 crore.

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Published on April 29, 2019
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