Fitch downgrades MGFL fixed deposit
By Pradeep Rane | 04 Apr 2002
Mumbai:
Fitch Ratings India has downgraded the rating of the fixed
deposit programme of the Motor and General Finance Limited
(MGFL) to Ind BBB-(FD) and has put the rating on rating
watch with negative implications. The rating indicates
that variability in risk during economic cycles is greater
than that of instruments rated higher.
The downgrade reflects MGFLs negative networth, high
levels of non-performing assets and continued deterioration
in financial performance. MGFL continued to report losses
in the first half of FY02. While total revenues have been
declining in recent years, MGFLs funding costs remain
high.
The company has scaled down its operations, and fresh disbursements are negligible. Outstanding fixed deposits had reduced to Rs 730 million in end-February 2002. Liquidity is sought to be increased through the sale of surplus land and premises, as well as securitisation of receivables.
The merger of associate companies with MGFL is likely to add to its already-weak financial profile and any advantage arising out of rationalisation of operations and management will be negligible. Fitch will continue to closely monitor MGFLs performance and developments on the merger front as well as capital infusion through rights issue. Any further deterioration in the companys financial performance or delay in raising capital may warrant further downgrades.
MGFL is one of the oldest finance companies in India engaged in lease and hire purchase of commercial vehicles. MGFL recorded a gross income of Rs 422.9 million in FY01 (1H2002: Rs 140.5 million), while its net loss stood at Rs 293.4 million for the same period (1H2002: Rs 96.8 million).
Fitch Ratings India is a 100-per cent subsidiary of Fitch Inc, one of the three internationally accredited credit rating agencies. Fitch rates 1,600 financial institutions, over 1,000 corporates and more than 700 insurance companies and 71 sovereigns.
Fitch India has four rating offices - Mumbai, New Delhi, Chennai and Kolkata. Fitch is recognised by the Reserve Bank of India, the Securities Exchange Board of India and the National Housing Bank.
The company has scaled down its operations, and fresh disbursements are negligible. Outstanding fixed deposits had reduced to Rs 730 million in end-February 2002. Liquidity is sought to be increased through the sale of surplus land and premises, as well as securitisation of receivables.
The merger of associate companies with MGFL is likely to add to its already-weak financial profile and any advantage arising out of rationalisation of operations and management will be negligible. Fitch will continue to closely monitor MGFLs performance and developments on the merger front as well as capital infusion through rights issue. Any further deterioration in the companys financial performance or delay in raising capital may warrant further downgrades.
MGFL is one of the oldest finance companies in India engaged in lease and hire purchase of commercial vehicles. MGFL recorded a gross income of Rs 422.9 million in FY01 (1H2002: Rs 140.5 million), while its net loss stood at Rs 293.4 million for the same period (1H2002: Rs 96.8 million).
Fitch Ratings India is a 100-per cent subsidiary of Fitch Inc, one of the three internationally accredited credit rating agencies. Fitch rates 1,600 financial institutions, over 1,000 corporates and more than 700 insurance companies and 71 sovereigns.
Fitch India has four rating offices - Mumbai, New Delhi, Chennai and Kolkata. Fitch is recognised by the Reserve Bank of India, the Securities Exchange Board of India and the National Housing Bank.