Gujarat Lease Financing Ltd

• Non Convertible Debenture- Rs 382.5 million Rating : Downgraded from BB to C
• Fixed Deposit Programme Rating : Downgraded from FB to FC

The rating assigned to the Rs. 382.5 million Non Convertible Debenture issue of Gujarat Lease Financing Limited (GLFL) has been downgraded from 'BB' (pronounced double B) to 'C' (pronounced single C). The rating assigned to the Fixed Deposit programme of GLFL has been downgraded from 'FB' (pronounced F B) to 'FC' (pronounced F C).

The revision in rating reflects GLFL's strained liquidity, deterioration in asset quality, continuing losses and erosion of networth. GLFL's cash flow position has been severely affected on account of significant deterioration of asset quality and weak resources position. The high level of delinquencies in industrial finance and retail finance has resulted in low collection efficiency, decline in income and large provisioning requirements. Decline in total income (net of lease depreciation) to Rs. 887.2 million in 1998-99 from Rs. 1,722.9 million in 1997-98 coupled with high interest expenses (Rs. 1,029.2 million) and provisions and write offs (Rs. 445.8 million) resulted in a net loss (adjusted) of Rs. 809.1 million in 1998-99. Consequently, networth of the company declined to Rs. 633.3 million as at March 31, 1999 from Rs. 1,426.6 million as at March 31, 1998. As at March 31, 1999, the capital adequacy of GLFL at 6.77% was below the statutory minimum of 8%.