The weak performance of property businesses and an acute liquidity crunch were cited as key reasons for rating downgrades. While the Indian economy is forecasted to grow at 6.1 per cent in the June quarter from a year ago, well below the 7-8 per cent growth seen in the past few years. Wariness in credit markets still remains high with little respite in sight.
Mangal Prabhat Lodha, India’s richest property tycoon:
Moody’s Investors Services and Fitch Ratings cut the credit rating of the closely held Macrotech Developers, founded by Lodha, by one notch this month, citing heightened liquidity risk
Lack of sufficient progress in refinancing upcoming debt maturities is a concern, Moody’s said; The developer has also been struggling to monetize assets in London, as well as domestically
Macrotech said that its total debt stands at Rs 19,000 crore ($2.66 billion) while its receivables from projects are Rs 38,000 crore. It also has commercial assets worth Rs 20,000 crore.
Ajay Piramal, billionaire heading Piramal Enterprises:
Piramal Capital & Housing Finance Ltd. and Piramal Realty Ltd. had rating cuts last month with assessors citing funding challenges for the country’s shadow lenders and heightened refinancing risk for property developers
Piramal Capital has identified 18 out of its total 232 deals involving loans to developers for corrective measures, according to recent exchange filings
Company has also been focusing on reducing developer lending for residential projects, cutting it to 47 per cent of the overall loan book of Rs 56,600 crore in June, from 79 per cent in March 2015
Pallonji Mistry, chairman of 150-year-old Pallonji Mistry Group:
Shapoorji Pallonji and Co. saw downgrades by Care Ratings and ICRA twice in last 12 months
Lower-than-anticipated progress on asset sales and weaker performance of the property business were cited as key reasons
The group recently listed its solar company Sterling & Wilson Solar Ltd., raising Rs 2,900 crore which will be used to pare debt
The rating cuts and liquidity crunch have put to test the belief that the prolonged slump in apartment sales is affecting small and medium-sized developers while larger ones, or those backed by top groups, have remained immune.
Still, these conglomerates may gain from the carnage that’s gripping India’s property market. Stricter laws and customer preferences for apartments that are ready to move into have prolonged developers’ working cycles, meaning that those with deeper pockets and the backing of wealthy founders tend to benefit.
“If the moguls manage to sell assets, raise funds and honor debt obligations this crisis will make them stronger in the long run. In the short run it is anybody’s guess,” said Centrum’s Upadhyay. “Creditors won’t easily come out of the overhang of the rising possibility of defaults by the nation’s richest, and rating downgrades of these groups, which were once considered pristine.”