Altico Capital India Ltd., a non-banking finance company backed by a set of marquee global investors, has defaulted on interest payment to Dubai-based Mashreqbank PSC.
The operating environment for real estate players has become extremely challenging, with the tepid sales velocity of residential units, especially in the mid and higher ticket segments, and the funding crunch faced by the sector, given the heightened risk aversion of lenders.India Ratings & Research (Rating Rationale For Altico Downgrade Dated September 3)
Paying For Aggressive Growth?
The Altico Capital default comes after a period of aggressive growth.
The NBFC’s loan book stood at Rs 6,905 crore at the end of FY19, up from just Rs 1,562 crore in FY16. The NBFC doubled its loan book in FY17 and expanded it by another 70 percent in FY18. Growth moderated in FY19 as pressures started to build-up in the real estate sector.
Through this period, the NBFC reported modest bad loans.
The gross non-performing assets of the NBFC stood at 1.8 percent at the end of FY19 from NIL in the preceding financial years. India Ratings, however, cautioned that the weak credit profiles of underlying projects could lead to higher NPAs.
The company also sold Rs 295 crore in stressed accounts to asset reconstruction companies In the last quarter of FY19, according to its financial statements. These loan accounts were classified as special mention accounts in the second category, suggesting they were overdue by more than 60 days.
Liquidity Risks
Like its peers, Altico Capital has faced liquidity pressure following defaults by the IL&FS Group in September 2018.
According to India Ratings’ note, Altico’s liquidity position was sufficient to meet only four and a half months of obligations. “Given the tight liquidity scenario, the probability of getting prepayments as envisaged would be low, which could exert further strain on the liquidity,” it said.
According to Bloomberg, Altico has around Rs 300 crore in principal and interest payments on debentures and loans due between Sept. 12, 2019, and Mar. 31, 2020. It had Rs 1,277 crore worth of cash and bank balances on its books as on Mar. 31, 2019.
The company’s total borrowings (including debt securities) stood at just under Rs 5,320 crore at the end of FY19, up from Rs 4,182 crore in the previous fiscal year. As of Sept. 12, the company had Rs 4,361 crore in borrowings from banks and financial institutions.
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