ICRA downgrades IDBI bank's bond rating

After CRISIL, now another credit rating agency ICRA downgraded the bond ratings of IDBI Bank. Citing its weak capital position ICRA downgraded the lender's total outstanding debt of Rs 25,924 crore as of  January 31, 2017 including the so-called additional tier-1 (AT-1) bonds. ICRA also placed them on rating watch with negative implications.

“The rating downgrade takes into account the bank’s substantially weak operating and financial performance during Q4FY2017 and in FY2017 overall, which has resulted in a significant erosion of its capital (CET-I),” ICRA said in a statement.

For the year ended March 2017, IDBI Bank reported a net loss of Rs 5,158 crore, significantly higher than Rs 3,665 crore in the previous fiscal year.

Its gross non-performing assets stood at Rs 44,753 crore or 21.25 percent, against gross NPAs of Rs 24,875 crore or 10.98 per cent, a year ago.

The bank will be constrained from servicing the coupon on these bonds till it improves its profits and CET1 levels (including CCB) above the regulatory levels by divestment of non-core assets and raising fresh capital before the coupon payment dates.

It was estimated by ICRA that the over the current financial year and next year the bank will require an equity infusion of Rs 9,500-12,000.

Although, IDBI will pursue further capital infusion from the government in order to ensure that it won’t fall below the 5.5 percent.