Business Today

Back To The Wall

NBFC crisis and indiscriminate borrowing to beef up its subsidiaries is at the root of Reliance Capital's crisis.

The liquidity crisis that is roiling non banking finance companies (NBFCs) has hit the one part of Anil Ambani's debt strapped business empire that was going strong its financial services business. Three rating agencies CARE, ICRA and Brickwork have downgraded the borrowings of Reliance Capital (RCap) and its subsidiaries. The debt crisis, which had overtaken the Reliance Group's telecom, power distribution and media businesses earlier, had an immediate effect on RCap shares, which fell from Rs 184.05 on April 15 to Rs 132.85 on April 30. They have since dropped further to Rs 121.15 (May 7).

CARE lowered the rating of some of RCap's debt instruments to 'D', which means the debt facility is either in default or is expected to be so soon. "The rating revision takes into account the recent instance of rescheduling of non convertible debentures, and delays in servicing of bank facilities by the company," said CARE.

ICRA pointed out that the repayment amount of two of RCap's subsidiaries, Reliance Commercial Finance (RCFL) and Reliance Home Finance (RHFL), was going to be higher than their cash

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