-CRISIL rates bond issue of Export-Import Bank of India at AAA.
7 March 2011 - Indian rating agency CRISIL on Friday assigned a AAA rating to a bond issue of Export-Import Bank of India.
The agency issued the following press release:
Rs.25 Billion Bond Issue AAA/Stable (Assigned)
Long-Term Loan Facilities Aggregating Rs.47 Billion AAA/Stable (Reaffirmed)
Bonds Aggregating Rs.311 Billion AAA/Stable (Reaffirmed)
Certificates of Deposit Programme AAA/Stable (Reaffirmed)
Term Deposit Programme FAAA/Stable(Reaffirmed)
Commercial Paper Programme P1+ (Reaffirmed)
CRISIL has assigned its rating of 'AAA/Stable' to Export-Import Bank of India's (Exim Bank's) bonds aggregating Rs.25 billion, and has reaffirmed its outstanding ratings on the company's other debt programmes at 'AAA/FAAA/Stable/P1+'. The ratings continue to derive strength from the fact that the institution is wholly owned by the Government of India (GoI). The ratings are also supported by the institution's strong capitalisation levels and high resource-raising ability. These rating strengths are partly offset by the institution's moderate profitability and moderate but improving asset quality.
Exim Bank plays an important role in implementing India's foreign trade policy. GoI has supported Exim Bank through periodic infusions of equity: In March 2010, GoI infused Rs.3 billion, thus increasing the institution's paid-up capital to Rs.17 billion. Additionally, GoI has accorded preferential treatment to Exim Bank: in 2001-02 (refers to financial year, April 1 to March 31), GoI converted the outstanding national industrial credit (long-term operations) loans of Rs.5.59 billion, extended to Exim Bank by the Reserve Bank of India (RBI), into 20-year subordinated debt. RBI has also extended a rupee facility of Rs.50 billion and a swap facility of USD 1 billion, for LOCs extended by Exim Bank to overseas banks/institutions/ governments for financing imports from India by the respective country.
Exim Bank has healthy capitalisation levels: the institution had a large absolute net worth at around Rs.45.3 billion, and a high Tier I capital adequacy at 16.9 per cent of risk-weighted assets, as on March 31, 2010. Despite the strong projected growth, the capitalisation levels are expected to remain at comfortable levels, supported by GoI's periodic capital infusions. The government is committed to infusing fresh equity capital into Exim Bank till the institution's equity capital reaches Rs.20 billion (authorised capital). The institution also has a proven ability to raise wholesale funds at competitive interest rates in the domestic and international capital markets.
However, EXIM bank's interest spreads are lower than that of commercial banks due to the nature of its operations. In 2009-10, it had a net profitability margin (NPM) of 1.5 per cent and a return on average assets (RoA) of 1.1 per cent, as against an NPM of 1.5 per cent and an RoA of 1.2 per cent in the previous year. The entity's asset quality is marked by exposure to medium credit-quality borrowers, and moderate, though declining, gross non-performing assets (NPAs). Gross NPAs of the bank have been reducing consistently; gross NPAs were at 1.0 per cent as on March 31, 2010, as against 1.2 per cent as on March 31, 2009.
CRISIL expects Exim Bank to continue to benefit from GoI support, given its strategic role in the formulation and implementation of India's foreign trade policy. The institution is also expected to maintain its strong capitalisation levels and moderate, but improving, asset quality. The outlook could be revised if, in CRISIL's opinion, there is material reduction in GoI's support to Exim Bank.
About Exim Bank
Exim Bank was set up in 1982. Its operations are structured into two major lending areas -- export credit, and finance for export capability creation--to support Indian companies that wish to globalise their operations. The institution also provides a range of information and advisory services to Indian companies to supplement their globalisation efforts. During 2009-10, Exim Bank made total disbursements of Rs.332.5 billion and its outstanding advances stood at Rs.386.1 billion as on March 31, 2010. In 2009-10, the institution recorded a profit after tax of Rs.5.13 billion, as against Rs.4.77 billion in the previous year.
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|Publication:||M2 Banking & Credit News (BCN)|
|Date:||Mar 7, 2011|
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