Fitch downgrades rating on Dewan Housing Finance to `AA-(ind)`

Credit rating agency, Fitch Ratings has today downgraded Dewan Housing Finance (DHFL) National Long-term rating to `AA-(ind)` from `AA(ind)` and affirmed its National Short-term rating at `F1+(ind)`. The Outlook is Stable.

Fitch has also simultaneously withdrawn its ratings on the company, including its ratings on:

Rs 2 billion non-convertible debenture programme ; Rs 2 billion fixed deposit programme ; Rs 200 million short-term debt programme.

The continued weakness in the operating environment and stress on household disposable income has increased the risk of DHFL`s asset deterioration. In addition, part of its loan book is not seasoned as 43% of loans at end-March 2009 were disbursed in the last two years.

Leverage (debt/equity) may increase to above 10x as recent equity infusion will be used to maintain its planned rapid growth in the medium term.

High leverage, together with low specific loan loss coverage, means that buffers to withstand asset quality shocks will be limited.

While performance has been fairly stable in the last four years, in Fitch`s view, DHFL`s credit metrics may not remain commensurate with the previous `AA(ind)` rating, which has resulted in today`s downgrade.

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