Fitch withdraws Unitech and Parsvnath from its rating coverage

The lack of information from realtors have grappled the realty industry since long, but now it has come to haunt the realtors themselves.

International agency, Fitch Ratings, has withdrawn ratings for various debt programmes for two north-based listed real estate companies, Unitech and Parsvnath Developers Ltd, from its coverage. It has also removed them from analytical coverage.

Fitch's report says, "the ratings have been withdrawn due to lack of adequate information. Fitch will no longer provide ratings or analytical coverage of Parsvnath and Unitech."

Parsvnath Developers Ltd was migrated to the 'non-monitoring' category on June 2 this year, whereas Unitech was moved to the same category in March. They were moved to the non-monitoring category due to unavailability of clear information on the debt programmes.
For Unitech, the rating agency has withdrawn its national long-term rating of 'Fitch B-(ind)nm'. The agency has also withdrawn Unitech's bank loan ratings on various instruments which includes "short term debt of Rs 1,100 crore which entailed Fitch A4(ind)nm. Rs500 crore, Rs 2,000 crore and Rs 1,900 crore long-term debt programmes with 'Fitch B-(ind)nm rating, Rs 100 crore short-term bank loan programme with a Fitch A4(ind)nm rating, and Rs 300 crore non-fund based bank limits with Fitch A4(ind)nm rating."
Unitech had mandated Fitch to rate a total of Rs 5,900 crore for its various debt instruments.

An official from Unitech who did not wish to be identified, said, "it is not a negative move for us, they have just withdrawn their rating. We had not sought their rating on the debt programmes and they had already moved us to the non monitoring category in March." There was no official comment from the developer.
Due to inadequate information, Fitch Ratings had put both the companies in the non-monitoring category. Once a company is put on non-monitoring, it falls under survelliance. After six months if adequate information is not available from the company, Fitch withdraws its rating on the company and its entire instruments which it was mandated to rate.

Analysts on the street who have Unitech under their coverage consider this move to be a negative development.
A research analyst with a domestic brokerage said, "It is a negative move because Fitch has clearly stated that they do not have enough information on the debt programmes. It is a concern why Unitech has not disclosed how the debt is being taken care of, how stressed are they keeping in mind that they have been paying off their debt in the last one year. Also the promoter pledging has slighlty gone up at the end of the September quarter. "
Parsvnath has been raising best part of its money through private equity route since last year, but hardly any analysts track the company.

The rating agency said in its release, "Fitch Ratings has withdrawn India-based Parsvnath Developers Limited's national long-term rating of 'Fitch B-(ind)nm'. Simultaneously, the agency has withdrawn the 'Fitch B-(ind)nm' rating on Parsvnath's long-term loans of Rs 200 crores and Rs 900 crores, and the 'Fitch A4(ind)nm' rating on its short-term loan of Rs 200 crores." It turns out to be a total debt burden of Rs 1300 crores.
As promoter and chairman of Parsvnath, Pradeep Jain, is travelling, the company declined to comment on the development.

Note: The copy was half published by my employer Business Standard Ltd.