Crisil and IDFC have been at loggerheads since October last. That was when the rater first said the infrastructure financier ought to bulk up its capital base. With the lender yet to oblige, Crisil has downgraded it from AAA/Stable to AA+/stable.
The downgrade primarily reflects the delay in IDFC's capital-raising. As a result, the institution's capitalisation is likely to remain short of earlier expectations, and well below the levels that supported the earlier rating. IDFC is unlikely to raise fresh equity capital in the near term.
Given the GoI's infrastructure investment thrust, significant opportunities for providing finance in the infrastructure domain are expected in the next few years. In such a scenario, IDFC is likely to accelerate lending in an effort to maintain its market position in this segment. The delay in capital infusion, in combination with increased disbursements, will result in a reduction in capitalisation ratios over the medium term.
The ratings were the highest possible on expectations that internal accruals and capital infusion will help the company maintain its Tier I capital adequacy ratio in excess of 20% in the medium term. But, Crisil said, capital infusion has not been up to the mark.