Last year Infrastructure Leasing & Finance Services (IL&FS) collapsed after defaulting on its debt obligations, which led to a huge financial crisis in India with weaker banks, mutual funds, pension funds, and many more institutions.
It triggered a liquidity crisis in the financial services market in the country. This year too almost similar trends seem to be coming up- this time it is Altico Capital, which has failed to meet its debt obligations.
Altico Capital investors Reliance Mutual Fund and Flipkart co-founder Sachin Bansal are facing immediate defaults on two series of outstanding debt worth Rs 95 crore coming up for repayment in the next two weeks.
According to the Indian Ratings & Research estimate, Altico Capital has bonds worth a total Rs 1,808 crore which will get mature between now and May 2022. The firm provides loans to real estate projects focusing on mid-income residential and commercial infrastructure across tier I cities.
Altico owes Rs 660 crore to the UAE-based Mashreq Bank, Rs 400 crore to SBI, Rs 200 crore to UTI MF, and Rs 150 crore to Reliance Nippon.
Four days back, Altico Capital which was expected to pay interest payments worth Rs 20 crore to Mashreq Bank due on its external commercial borrowings (ECB) failed to make the payment.
And as a result, Altico ratings depleted from AA- to B by CARE Ratings and reduced to D by Indian Ratings & Research.
Backed by Clearwater Capital Partners, Varde Partners and Abu Dhabi Investment Council, Altico failed to pay a relatively small amount of interest due to ECB regulations strict-end restrictions.
Altico, which also approached RBI, did not get the permission to pay the interest through ECB funds as it cannot be used for any other purpose rather than on-lending.
Ahead of the default, Altico’s liquidity situation has weakened and around 42% of its loan portfolio lay in the 31-90 day default classification showing all the signs of a high rate of stress.
Importantly, SBI Chief, Rajnish Kumar has slammed a “selfish” private sector lender for the crisis at Altico Capital. He said that the action to secure its own money can potentially cause troubles to the wider economic system.
Altico’s Chairman Nina Lal Kidwai had put down her papers on September 16 due to the ongoing contradictions in planning and strategy by the company along with irksome board duties.
Meanwhile, Altico is being continuously questioned for its credibility.
This development was first reported by ET.