Bank of Baroda classifies two ADAG-owned NBFCs as NPAs in Q2

Bank of Baroda (BoB) is understood to have classified its exposures to two non-banking financial companies (NBFCs) from the ADAG group as non-performing assets (NPAs) during the quarter ended September, persons familiar with the developments told FE.

Email requests to BoB did not elicit a response. When asked for response, Reliance Capital declined to comment.

So far, CARE Ratings has downgraded to default grade debt worth over Rs. 30,000 crore owed together by Reliance Home Finance and Reliance Commercial Finance. BoB is the lead bank in the consortium of lenders to the two companies.

Apart from the two NBFCs, which are subsidiaries of Reliance Capital, BoB also had a large account slipping in the travel and tourism sector, understood to be that of Cox & Kings.

SL Jain, executive director, BoB, told analysts in a post-results meeting that there had been three to four large corporate slippages in Q2FY20. “Two are NBFC accounts, one is a plastic/textile account and another is a travel agent account. Of the Rs. 6,000 crore (total slippages in Q2), about Rs. 3,000 crore have come from these few accounts. The rest is MSME (micro, small and medium enterprises), agri and retail,” Jain said.

The two NBFCs first defaulted in April 2019, following which several of their debt facilities have been downgraded to default by rating agencies over the last six months.

Meanwhile, lenders to the companies have signed inter-creditor agreements (ICAs) to initiate the process of resolution, in line with the RBI’s June 7 circular.

Reliance Home Finance told the exchanges on September 19: “The company has been directed by the lenders led by the lead bank to keep servicing only the interest obligation across all lenders.”

In the rationale for its latest rating action against Reliance Commercial Finance, CARE Ratings wrote that the liquidity profile of the group continues to be under stress on account of delay in raising funds from the asset monetisation plan and impending debt payments.

Analysts at Icra wrote while downgrading Reliance Home Finance’s Rs. 1,200-crore commercial paper (CP) programme in May 2019, that it carries a fair amount of concentration risk in its asset book. “The company has a geographically concentrated loan portfolio with the regions of Maharashtra, Gujarat, Tamil Nadu and Delhi accounting for 26%, 24%,14% & 10%, respectively, of the overall loan book. Further, the entity continues to have a high share of construction finance loans, which accounted for 36% of the overall loan book,” they noted.