Mumbai:
Fitch Ratings India has downgraded the rating of the fixed
deposit programme of the Motor and General Finance Limited
(MGFL) to Ind BBB-(FD) and has put the rating on rating
watch with negative implications. The rating indicates
that variability in risk during economic cycles is greater
than that of instruments rated higher.
The downgrade reflects MGFLs negative networth, high
levels of non-performing assets and continued deterioration
in financial performance. MGFL continued to report losses
in the first half of FY02. While total revenues have been
declining in recent years, MGFLs funding costs remain
high.
The company has scaled down its operations, and fresh
disbursements are negligible. Outstanding fixed deposits
had reduced to Rs 730 million in end-February 2002. Liquidity
is sought to be increased through the sale of surplus
land and premises, as well as securitisation of receivables.
The merger of associate companies with MGFL is likely
to add to its already-weak financial profile and any advantage
arising out of rationalisation of operations and management
will be negligible. Fitch will continue to closely monitor
MGFLs performance and developments on the merger front
as well as capital infusion through rights issue. Any
further deterioration in the companys financial performance
or delay in raising capital may warrant further downgrades.
MGFL is one of the oldest finance companies in India engaged
in lease and hire purchase of commercial vehicles. MGFL
recorded a gross income of Rs 422.9 million in FY01 (1H2002:
Rs 140.5 million), while its net loss stood at Rs 293.4
million for the same period (1H2002: Rs 96.8 million).
Fitch Ratings India is a 100-per cent subsidiary of Fitch
Inc, one of the three
internationally accredited credit rating agencies. Fitch
rates 1,600 financial institutions, over 1,000 corporates
and more than 700 insurance companies and 71 sovereigns.
Fitch India has four rating offices - Mumbai, New Delhi,
Chennai and Kolkata. Fitch is recognised by the Reserve
Bank of India, the Securities Exchange Board of India
and the National Housing Bank.
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