Altico Capital India Ltd, a lender to real estate companies, said it has defaulted on interest payments worth ₹19.9 crore due to Mashreq Bank of Dubai, highlighting the rising stress in India’s cash-starved property market.
The interest payment default occurred on a principal of ₹340 crore, Altico said in a stock exchange filing on Thursday. This, the company added, may lead to further defaults down the line. The company has a total outstanding debt of ₹4,361.55 crore.
“Our failure to repay the amounts set out above may result in an acceleration of interest repayment/redemption obligations in respect of non-convertible debt securities issued by us and may trigger a default in their timely repayments. We are evaluating options for resolving the liquidity crisis and will be engaging in discussions with various stakeholders for the same,” the lender said.
Interestingly, one of Altico’s lenders includes celebrated e-commerce entrepreneur Sachin Bansal. The Flipkart co-founder invested ₹250 crore in non-convertible debentures issued by Altico in February.
The default by Altico follows a rating downgrade and the resignation of its chairperson and independent director Naina Lal Kidwai, former head of HSBC India, earlier this month.
On 3 September, India Ratings and Research downgraded Altico Capital’s long-term issuer rating to “IND A+” from “IND AA-” and short-term issuer rating to “IND A1″ from “IND A1+”, with a negative outlook.
“The operating environment for real estate players has become extremely challenging, with the tepid sales velocity of residential units, especially in the mid- and higher ticket segments, and the funding crunch faced by the sector, given the heightened risk aversion of lenders. Dampening of sales has been higher for Tier II and Tier III developers (excluding the top 15 developers in the industry), who are the target customers for NBFCs,” the rating agency noted.
The tightened liquidity has also resulted in shrinkage of borrowing options for the developers, leading to lower portfolio churn, and hence, increased challenges on asset quality, it added.
“Altico’s loan book ( ₹6,900 crore in June 2019) has exposure to real estate developers, many of whom have weak and stretched credit profiles,” said India Ratings.
Some of Altico’s real estate exposures include a ₹570 crore investment in Assetz Property Group and a plotted development project of Century Real Estate Holdings, a ₹120 crore investment in an affordable housing project being developed by the Century group, and ₹650 crore debt financing to Mumbai-based warehouse and industrial park Renaissance Industrial Smart City, according to the lender’s website.
Altico Capital chief executive Sanjay Grewal said in an 8 August interview that the NBFC plans to expand into housing finance and that it is in talks to acquire a retail lending portfolio from housing finance companies including Reliance Home Finance Ltd.