With the second wave of Covid-19 coming in April 2021, the country again experienced a series of blockages that affected the cash flows of borrowers.
In addition, the company, which provides loans primarily to employees, was unable to collect from borrowers. This led to a sharp increase in slippage and a weakening of the solvency and profitability indicators.
Rating agency ICRA downgraded the rating on long-term bank lines and non-convertible bonds (NK) from ‘AA +’ to ‘AA’.
The deterioration in asset quality will further affect GICHF’s profit profile and, as a result, its internal capital generation.
ICRA Given the relatively low growth expectations, the company will not need capital to grow in the short term. The Capital Adequacy Ratio (CAR) was 17.14% as of June 30, 2021, above the 14% regulatory requirement.
Its borrowed capital was relatively high – 8.1 times (8.3 times compared to March 31, 2021), although this figure decreased from 9.3 percent in March 2020.
The company has enough room to raise Tier 2 capital as all capital is currently in the form of Tier 1 capital.
Gross Nap increased to 11.4% in June 2021 from 5.64% in June 2020 Net Nap rose from 3.05 percent in June 2020 to 7.86 percent in June 2021. The home loan book shrank in 12 months to Rs 12,045 in June 2021 from Rs 12,781 a year ago, according to a statement to the BSE.
ICRA said the company has strengthened its underwriting processes over the past two years. The loans disbursed under the new structure were better than those previously disbursed and management took steps to recover from the stressful accounts. The ultimate losses on these accounts will be low given the secured nature of these loans.