Deteriorating financial performance due to an increase in “problem assets” has driven Moody’s to downgrade outlook for Indian Renewable Energy Development Agency (Ireda).
Deteriorating financial performance due to an increase in “problem assets” has driven Moody’s to downgrade outlook for Indian Renewable Energy Development Agency (Ireda). If the weak financial performance lasts over the next 12-18 months, it might also compromise Ireda’s baseline credit assessment of ba3 – the agency’s long-term bond rating, it said.
At the end of the quarter ended September 30, 2018, Ireda’s non-performing loan ratio was at 7.4%, significantly higher than the 6% recorded at the end of FY17 and nearly twice the proportion seen in FY13. Moody’s estimates a slowdown in the company’s credit growth until the materialisation of Ireda’s initial public offering, which has been on the anvil for quite some time.
Ireda’s profitability – the ratio between net income and average managed assets – fell to 0.8% (on annualised basis) in the first six months of FY19. Ireda’s profitability was 2.% in FY18 and 2.3% in FY17. One-off impact of higher provisions for funded interest on restructured loans contributed to drop in profitability, Moody’s added.
Strong credit growth and mark-to-market losses from its unhedged foreign currency exposure” also pushed down Ireda’s capitalisation. However, long-term borrowings from multilateral agencies is seen to be providing support to Ireda’s funding and liquidity profile. The government routes various subsidies and grants to the renewable energy sector through Ireda.
Source: financialexpress
