The company continued to show high gearing against an expectation of significant reduction in gearing through capital infusion and liquidity stress in the NBFC sector, affecting the borrowing capacity of the company, Brickworks said.
However, the rating continues to derive comfort from the experience of the promoter group in line with infrastructure financing and equipment financing businesses.
The ratings also factor in established market position and brand name and adequate liquidity profile.
The outlook continues to be negative considering the risk of further weakening of asset quality, declining profitability and AUM and to monitor the ability of SIFL to borrow for continued growth while maintaining its cost of funds and profit margins. The ability to reduce its gearing is also a key monitorable.
SIFL's Consolidated Assets Under Management (AUM) has decreased from Rs 41,476 crore in FY18 to Rs 39,853 crore in Q1FY20. This is mainly due to SIFL strategically deciding to curtail disbursements due to stress in infrastructure segment and to maintain sufficient liquidity. At the same time, SIFL has curtailed its disbursements in Q1FY20, mainly due to capital adequacy being very close to the regulatory requirement of 15 per cent and the shift in focus on co-lending model.