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Rating agency ICRA has downgraded short term ratings for PTC Financial Services (PFS) from “A1+” to “A1”, citing significant moderation in the company’s operations, weakness in asset quality and moderate profitability indicators.
PFS, a Delhi-based non-banking finance company (NBFC), was placed under watch in January 2022 with negative implications after its three independent directors resigned citing corporate governance lapses.
Two independent directors appointed in March 2022 resigned on December 3 citing corporate governance lapses.
The company has refuted the allegations and said it adheres to the best corporate governance practices under the guidance of its promoter, PTC India Ltd, the regulator and the government.
ICRA said the ratings have been removed from watch with negative implications. Its long-term ratings affirmed at “A+” with a negative outlook.
The ratings favourably factor in a comfortable capitalisation profile for current scale of operations with a capital adequacy ratio (CAR) of 31.7 per cent as on September 30, 2022.
They also take into account its comfortable liquidity position backed by higher on-balance sheet liquidity. There is board oversight and majority ownership of PTC India Ltd which held 65 per cent shareholding in PFS and PTC’s chairman and Managing Director holding the position of Non-Executive Chairman at PFS.
ICRA warned that lender confidence could be impacted following recent events and this in turn could lead to delayed recovery in the financial flexibility for PFS. Additionally, with the increased oversight by regulatory agencies, normalcy of business operations is expected to be delayed. Any adverse stance taken by the lenders and regulators would be a key rating factor.
The profitability could come under pressure if the company is not able to improve the business volumes going forward, ICRA said.
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