Moody's Downgrades Hero FinCorp's Ratings With Negative Outlook

Moody's Investors Service on Friday downgraded Hero FinCorp's foreign and local currency issuer ratings to Ba1 from Baa3, citing that the coronavirus outbreak would impact its credit quality. The non-banking finance company's (NBFC) outlook has also revised to negative from ratings under review.

Given the negative outlook, an upgrade is unlikely in the near term, said Moody's, adding that it could return to stable if the company is able to absorb the impact of the asset quality deterioration and higher credit costs in the current fiscal year without materially impacting its capital position.

The American rating agency expects the company's profitability and asset quality to stabilise beyond fiscal year ending March 2021.

"Hero FinCorp's asset quality and profitability to weaken as loan delinquencies and defaults increase, because customers and businesses face a drop in earnings and cash flows due to the economic disruptions caused by the coronavirus outbreak," Moody's said.

Hero FinCorp's unseasoned loan book also poses risks to asset quality, given its limited operating track record and rapid growth in the past few years, it added.

Sandip Ginodia , CEO

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