Real estate exposure bleeds Altico Capital


Mumbai: Little known Altico Capital became a talking point on Thursday, after the company said it missed interest payment of around Rs 20 crore on a loan from Dubai-based Mashreq Bank. This latest default by a non-banking finance company, when the sector is going through a liquidity crisis, has led to fears of the contagion spreading wider.

Formed in January 2004, Altico is promoted by Hong Kongbased $6.5-billion private equity fund Clearwater Capital Partners with a 44.2 per cent stake. Other investors are sovereign wealth fund Abu Dhabi Investment Council (33.60 per cent) and US-based Varde Partners (22.2 per cent).

The company’s main focus is on lending to builders and other real estate companies. It had a loan book worth Rs 6,906 crore at the end of March 2019, according to information on its website. It slumped to a loss of Rs 13 crore in the half year ended March 2019 from a profit of Rs 100 crore a year earlier, mainly due to higher financing costs and a loss on the sale of loans to asset reconstruction companies (ARCs).

Financing costs increased to Rs 304 crore from Rs 193 crore a year earlier and Altico recognised Rs 294 crore as its loss from the transfer to assets to ARCs. Bankers said the company’s exposure to illiquid real estate debt is now coming home to roost.

“This company has a 100 per cent exposure to real estate and it is the dirtiest of assets in today’s times. The way things are, this company should just transform into a bad loan company because some of these loans are toxic,” said an investment banker closely tracking the company. “Altico is backed by marquee investors, so it may well come out of this crisis, but how and for how long it will survive is a question mark.”

The troubles for the company started when India Ratings & Research downgraded its debt to A+ from AA- citing a challenging environment for developers.

On Friday, CARE Ratings downgraded the company’s debt to B- from AA-. “Altico faces concentration risk inherent in wholesale lending owing to exposures with large ticket sizes. Top 5 group exposures as a percentage of net worth as on March 31, 2019 stood at around 84 per cent (FY18: 69 per cent) … Top 10 group exposures as a percentage of net worth as on March 31, 2019 stood at around 139 per cent (FY18:123 per cent) … The risk of financial loss in case of slippage is mitigated to some extent by adequate collateral/ security (around two times security cover) maintained by the company, majorly in the form of real estate and pledge of shares,” CARE said.