CRISIL has downgraded its rating on the debt instrument and bank facilities of Bhartiya Samruddhi Finance Ltd (BSFL) to ‘CRISIL D’ from ‘CRISIL C’.
The downgrade reflects instances of delay by BSFL in servicing its debt; the delays have been caused by the company’s insolvent financial position and weak liquidity. Based on discussions with BSFL’s current management, CRISIL understands that the company is in the process of undergoing a corporate debt restructuring (CDR), given its inability to repay its debt in the near term. BSFL has received a letter of approval from the CDR cell and the documents have been signed.
For the CDR, BSFL’s promoters are required to infuse Rs.250 million in the form of equity. For this, the promoter company has approached investors that would be willing to infuse this equity capital into the company. The key features of the restructuring package are currently being finalised. BSFL has, however, stopped repaying majority of its outstanding debt since January 2012 due to financial insolvency and lack of liquidity.
The company reported a negative net worth of Rs.3.73 billion as on March 31, 2012, as against a net worth of Rs.2.1 billion as on March 31, 2011. CRISIL will continue to monitor the terms of the final restructuring under CDR, and assess their impact on the company’s credit risk profile.
About the Company
BSFL, a non-banking financial company promoted by Bhartiya Samruddhi Investments and Consulting Services Ltd, began operations in 1997. BSFL provides microfinance (credit and insurance) services and knowledge-based technical assistance.
Its services are organised under three major heads: livelihood financial services, common service centres and institutional development services. The company’s customers include small and marginal farmers, rural artisans, micro enterprises, and federations and co-operatives owned by self-help groups.
BSFL’s total assets under management were Rs.2.9 billion as on March 31, 2012, as against Rs.12.5 billion as on March 31, 2011. The company reported net loss of Rs.5.8 billion for 2011-12 (refers to financial year, April 1 to March 31) as against a profit after tax of Rs.100 million for 2010-11.