SINGAPORE: Fitch Ratings has taken rating action on the Long-Term Issuer Default Ratings (IDR) of four Indian non-bank financial institutions (NBFI) in light of the companies’ performance amid the coronavirus pandemic.

The rating actions are as follows:

·         IIFL Finance Limited ‘B+’ rating maintained on Rating Watch Negative (RWN)

·         Manappuram Finance Limited (MFIN), affirmed at ‘BB-‘; RWN removed; Outlook Stable

·         Muthoot Finance Ltd (MFL), affirmed at ‘BB’; RWN removed; Outlook Stable

·         Shriram Transport Finance Company Limited (STFC), affirmed at ‘BB’; RWN removed; Outlook Negative

The RWNs on the bond ratings of MFIN, MFL and STFC have also been removed.

The companies’ Long-Term IDRs were placed on RWN in March this year, as Fitch expected the pandemic to present further macroeconomic and funding challenges for the entities, heightening downside risk to their credit profiles.

IIFL Finance’s rating remains on RWN due to continued uncertainty on its funding and liquidity, with trends potentially becoming more evident within the next six months. This is despite a steady improvement in collections over the past few months and easing funding conditions, which have partly benefited from government support measures for NBFIs and other parts of the economy.

The removal of the RWN and Stable Outlooks on MFIN and MFL’s ratings reflect the entities’ generally resilient performance in the face of significant economic disruption amid local measures to contain the pandemic.

The RWN on STFC’s ratings has been removed, as we believe near-term operational uncertainty is easing for the entity. However, the Negative Outlook highlights the ongoing downside risk to asset quality and the implication for the company’s funding and liquidity, which will only become apparent in the medium term.

The ratings of the entities continue to reflect the considerable economic and financial challenges arising from the pandemic.

Fitch has revised down India’s (BBB-/Negative) GDP growth forecast for the financial year ending March 2021 (FY21) by 5pp to -10.5%, one of the sharpest negative revisions across the major economies in Fitch coverage.

“We expect economic activity to remain below pre-pandemic levels for at least the next year, pressuring system asset quality and funding and liquidity conditions. This is likely to be partly offset by government measures to support the economy and boost funding access,” a news release said.