DHFL shares fall on credit rating downgrade

The shares of Dewan Housing Finance Corporation Limited (DHFL) plummeted more than 5 per cent this morning after the credit rating agency ICRA downgraded the company’s commercial papers to A2+ from A1+.

The rating was for outstanding Commercial Papers of merely Rs. 1,525 crore of a total rated amount of Rs. 8,000 crore, which accounts for less than 2 per cent of the company’s outstanding borrowings.

ICRA’s decision to downgrade DHFL’s rating comes approximately three weeks after the company was downgraded and kept on watch by all the rating agencies. The company claims that since then, no material events occurred which could prompt ICRA to review the ratings within a month.

DHFL had conveyed to ICRA its intention to extinguish the commercial paper outstanding by the end of March – a fact that ICRA acknowledged in its press release. However, DHFL is now ruffled because ICRA failed to take cognizance of this in its decision to downgrade the company. It also failed to consider that DHFL is in the advanced stages of fundraising transactions.

Despite repeated representations to the rating agency and imparting the extent of panic it could trigger, ICRA proceeded with the rating action anyway. This is unnerving, especially since DHFL is on the path of returning to normalcy and has successfully met each of its obligations on time.

DHFL is of the opinion that the rating downgrade is not merit-based by any means, particularly because the company has established its overall commitments including asset sell downs, as it did with its stake in Aadhar HFC, reducing CP exposures etc.

ICRA has rated only the short-term instruments of the company, namely commercial papers. Post repayment of the outstanding CP of Rs. 1,525 crore, DHFL will not have any outstanding commercial paper rated by ICRA.

At 13:04 hours, the scrip of DHFL was trading at Rs. 132.15 per share, down 3.33 per cent, while the BSE Sensex was at 36,069.68, down by 143.70 points or 0.40 per cent on Tuesday.