Poonawalla Housing Fin stake sale leads to rating downgrade

livemint.com:

MUMBAI : Rating agency Care Ratings has downgraded the rating of Poonawalla Housing Finance by three notches, citing divestment by the promoter group. Care has downgraded ratings on long-term bank facilities, non-convertible debentures of Poonawalla Housing Finance from Care AAA to Care AA-. In a report issued on 18 August, Care Ratings said the rating downgrade has been due to “disassociation with Cyrus Poonawalla Group post the sale of 99% stake in the HFC (housing finance company) to private equity player TPG’s affiliate Perseus." On 27 July, TPG announced completing its acquisition of a 99.02% equity stake in Poonawalla Housing Finance Ltd, from Poonawalla Fincorp Ltd.

This revision in ratings comes even after TPG has promised to infuse ₹1,000 crore of capital over the next year, of which ₹537.7 crore has already been infused in August. The private equity player is also backing the existing management team led by managing director and chief executive officer Manish Jaiswal and the current business model of Poonawalla Housing of serving the affordable housing segment. “This kind of rating revision happened even when Gruh Finance was acquired by Bandhan Bank, from AAA to AA.

It is believed that the promoter company which has lent out its name will not likely default. Typically, private equity investors have a time horizon in terms of exiting the business," an official with a rating agency said on condition of anonymity. With the revision, the borrowing cost for Poonawalla Housing Finance is likely to go up by around 50-60 bps.