After seeing losses for the past three years, IndoStar Capital Finance Ltd returned to profit in the June quarter, thanks to lower credit cost provisions in the commercial vehicle segment. The non-bank lender recorded a net profit of ₹60.93 crore, against a net loss of ₹36.80 crore a year earlier.
The results come at a time when the non-banking finance company (NBFC) is facing a rating downgrade after its auditor raised doubts about its ability to continue as a going concern. In a press release, IndoStar said it has made efforts to reduce the stress book in the commercial vehicle segment. Collections improved during the quarter to ₹1,312 crore, with gross collection efficiency of 181%. The company also said it has made provisions against the stressed commercial vehicle segment.
“During the quarter, the company made concerted efforts to reduce the stress book by driving customer settlements and the sale of 50% of stress book to an ARC. The stress book is 5% of AUM as of 30 June 2022,” it said. “We have strengthened controls, reviewed policies and upgraded technology across the spectrum of loan origination, credit appraisal, disbursal, loan management and collection processes,” it added.
IndoStar’s capital adequacy stood at 29% at the end of June quarter. Gross non-performing assets improved to 8.2% as on June end, compared to 15.5% as on March end.
The NBFC had seen a spike in NPAs primarily due to control deficiencies in its ₹1,381 crore stressed CV portfolio, where restructuring took place without complying with its internal or the Reserve Bank of India’s policies, and the impact of covid-19 on its borrowers.
In a qualified opinion on IndoStar Capital’s annual accounts recently, statutory auditors Deloitte Haskins and Sells LLP said its liabilities had exceeded total assets maturing within 12 months by ₹2,206 crore, and for certain borrowings, gross NPAs and net NPAs had exceeded thresholds.
Following this, rating agency Care Rating last week downgraded the NBFC’s rating on the long-term instruments from AA- to A+. On Saturday Crisil downgraded the rating to watch with negative implication.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess