“The sector has gone into ICCU (intensive coronary care unit) over the past eight months”, said Ambani | Expects support from new government and RBI
Reliance group chairman Anil Ambani talked about the full-blown crisis faced by Reliance Capital. He thinks the contagion and cascading effects on the economy are clearly visible.
“Banks are now cherry-picking these quality portfolios, at a very high cost for NBFCs and HFCs (housing finance companies),” said Ambani. “The balance sheet size of all major players has shrunk in the past eight months. It is a full-blown crisis.”
- Anil Ambani in an interview said NBFC are facing a full-blown crisis.
- “The sector has gone into ICCU and needs full life support” – Ambani.
- Expects an immediate liquidity window from RBI and the government as a support
- He also believes India Inc. has been hit by 3Cs – cash, court and credit rating agencies
- To reduce their debt, Reliance Capital has sold 43% of its stake in Reliance Nippon Asset Management to Japanese partner Nippon Life.
- The monetization of a 35% stake in Prime Focus, and divesting the entire stake in the radio business to aid their debt-reduction program.
Ambani said all his firms are fully capitalized and they have been told that value creation and value unlocking must lead to debt reduction.
Rating agencies have become judge jury and executioner
Anil Ambani believes the rating system in India has not yet attained the requisite expertise and sophistication. After the IL&FS episode, they have swung to the other end of the spectrum. He pointed out there is no credible review mechanism for proposed rating actions. “The present system of review by a committee comprised a majority from the rating agency itself, and only one independent minority member is unfair and inadequate. The majority should be qualified and independent external persons.”