SATIN CREDITCARE NETWORK LIMITED

Transcription

1 SATIN CREDITCARE NETWORK LIMITED Ratings Instrument/Facility Amount (Rs. crore) Ratings 1 Remarks Fully Paid-Up Cumulative Non- Convertible Compulsorily Redeemable Preference Shares (Proposed) Long-term bank facilities 800 (enhanced from Rs cr) 7.50 CARE BBB- (Triple B Minus) CARE BBB (Triple B) Assigned Reaffirmed Rating rationale The ratings continue to factor in the strengthening of net worth through consistent equity infusion thereby ensuring adequate capitalization level, steady growth in business while maintaining comfortable asset quality and moderate profitability indicators. The ratings also factor in the experience of the promoter and management team, diversified resource base, adequate risk management systems and foray in the areas with relatively less penetration of microfinance. The ratings, however, remain constrained by modest earnings profile, geographical concentration of operations and regulatory uncertainty and socio-political intervention risks in the microfinance industry. Geographical diversification, improvement in profitability and capital adequacy ratio, maintaining asset quality are the key rating sensitivities. Background Satin Creditcare Network Limited (SCNL) is a Delhi-based microfinance company registered with RBI as a non-deposit accepting, systemically important non-banking financial company (NBFC). The company has been granted NBFC-MFI status on Nov 06, 2013 by RBI. Incorporated in 1990, the company was initially engaged in providing individual loans to the shopkeepers in the urban area. In 2008, the company started group lending business with joint liability group model, wherein the company provides micro loans to individual members in the group with each group consisting of five members (loans provided are based on the joint guarantee from members). As on December 31, 2013, SCCNL was operating in 14,543 villages being managed through 187 branches. The operations of the company are spread across ten states/ UTs i.e. Uttar Pradesh, Delhi/ NCR, Madhya Pradesh, Bihar, Uttarakhand, Rajasthan, Haryana, Punjab, Chandigarh and Jammu & Kashmir. Credit Risk Assessment Long track record of the company and experienced promoter and management SCCNL has been carrying out individual lending activities since The company entered into microfinance activities in 2008 and has gained reasonable experience in the group lending business. The promoter, Mr HP Singh, is the Chairman and Managing Director of the company. He is supported by a management team having rich experience in the financial services and microfinance sector. Adequate risk management systems SCCNL has established an efficient monitoring structure for overseeing its operations at various levels, including at area level, regional level and state level. It has put in place risk management systems viz. defined credit appraisal, collection and monitoring systems including profile of the clients and outer limit of loan size. Specialized software and user-level restrictions are in place to ensure a speedy access to the information with data security. Operates in regions with lesser penetration of other MFIs SCCNL has maintained its competitive positioning through its presence in the urban and rural areas and offering both individual and group lending products. The proportion of group lending portfolio has been increasing over the years and as on March 31, 2013, it constituted 87.1% of total loan portfolio. The company has presence in northern India where there is relatively low 1 Complete definition of the ratings assigned are available at and in other CARE publications 1

2 penetration of other MFIs. Presently, the operations of the company are spread across ten states/ UTs i.e. Uttar Pradesh, Delhi/ NCR, Madhya Pradesh, Bihar, Uttarakhand, Rajasthan, Haryana, Punjab, Chandigarh and Jammu & Kashmir. As on December 31, 2013, SCCNL was operating in 14,543 villages (vis-à-vis 11,945 villages as on March 31, 2013) managed through 187 branches (Individual & JLG). The total workforce as on December 31, 2013 stood at 1785 (vis-à-vis 1,437 as on March 31, 2013). Adequate capitalization SCCNL s capitalization is adequate owing to the regular equity infusion by the promoters and private equity (PE) investors. The capital adequacy ratio (CAR) stood at 16.08% as on December 31, 2013 (above the minimum regulatory requirement of 15%). Even post the AP ordinance, as the sector was facing funding constraints, SCCNL has been successful in raising equity from the promoters, individual investors and PE investors at regular intervals (Rs.42.4 crore in FY11 and Rs.41.0 crore in March 2013). Further, timely infusion of funds remains crucial for sustaining business growth while maintaining adequate capitalisation. Good asset quality SCCNL has been able to maintain asset quality at comfortable levels. As on December 31, 2013, the Gross NPA percentage was 0.07% (reduced from 0.16% as on March 31, 2013) and Net NPA percentage was Nil. Diversified resource base The major source of external funding for SCCNL has been term loan from banks/ financial institutions (FIs). SCCNL has a lender base of 35 institutions, including 11 public sector banks, 11 private sector banks, three foreign banks and 10 domestic and foreign institutional lenders. SCCNL has also accessed securitization/ assignment route for tapping funds. The off-balance sheet portfolio as on December 31, 2013 stood at Rs crore (vis-à-vis Rs crore as on March 31, 2013). The company has also tapped non-convertible debentures (NCDs) route for raising funds. Healthy growth in loan portfolio SCCNL disbursed fresh loan of Rs crore during FY13 (growth of 62% over FY12) taking its total loan portfolio to Rs crore as on March 31, 2013 (increased from Rs crore as on March 31, 2012). Amount of loan disbursed stood at Rs crore as on December 31, The total assets as on March 31, 2013 increased to Rs crore including cash & bank balance of Rs crore (including term deposits of Rs crore). Out of this, the term deposits under lien as security against term loan availed and asset assigned/ securitized was Rs crore. As on December 31, 2013, the total loan portfolio stood at Rs crore (including off-balance sheet portfolio of Rs crore). Earning profile, though improving, continues to remain modest SCCNL derived the benefits of economies of scale as the disbursements and loan portfolio increased during FY13. As a result, the total operating income of the company increased from Rs crore for FY12 to Rs crore for FY13. The company has been able to control the operating expenses with an increasing growth in the business which has led to an increase in the PAT margin from 2.52% for FY12 to 4.13% for FY13. In spite of the improvement, the earnings profile continues to remain modest. During 9MFY14 (refers to the period April 1 to December 31), the company achieved a total operating income of Rs crore and a PAT of Rs.8.99 crore. Profitability continues to remain a key rating sensitivity for SCCNL. Geographical concentration The regional concentration risk continues for SCCNL as 73.7% of total loan portfolio as on March 31, 2013 is concentrated in two states i.e. UP and Delhi/ NCR. However, the same has reduced from 82.9% of total portfolio as on March 31, During FY13, the company expanded its operations to another state i.e. Jammu and Kashmir. Regulatory uncertainty and socio-political intervention risks in the microfinance industry On the regulatory front, the key development was implementation of the Malegam Committee s recommendations by RBI for creating separate category for NBFC-MFIs and retaining the priority sector status for NBFC MFIs. The regulations are for both operational and financial aspects of an MFI and provide comprehensive framework across the country and bring more clarity on the regulatory framework for the sector. The Central Government has also released a draft MFI bill (The Microfinance Institutions Development and Regulation Bill 2012) in May, 2012, intending to provide formal statutory framework for the microfinance sector. However, until a clear and unambiguous set of guidelines are implemented for the sector, the risk of intervention similar to AP ordinance in other regions remains to be seen. 2

3 Financial Performance As on / Year ended March A A A Working Results (Rs.Crore) Interest on Loans Total Income Interest Expense & Finance Charges Net interest income Operating Expenses Depreciation Total Provision / Write offs PBT PAT Financial Position (Rs.Crore) Tangible Net worth Total Borrowings Total Loan Portfolio Total Assets Assets Under Management (AUM) Key Ratios Solvency Overall Gearing (times) Interest coverage (times) Capital Adequacy Ratio (CAR) (%) Tier I CAR % Profitability (%) Net Interest Margin Operating Expenses/ Average Total Assets ROTA (PAT / Average Total Assets) PAT / Total Income (PAT Margin) Asset Quality Ratios (%) Gross NPA Ratio Net NPA Ratio Nil Net NPA to Net worth Nil Note: Ratios have been computed based on average of annual opening and closing balances; NIM has been calculated as net interest income/ average annual total assets Analyst Contact Name: Ankita Sehgal Tel: Mobile: ankita.sehgal@careratings.com (This follows our brief rational for entity published on 12 February, 2014) 3

4 DISCLAIMER CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/ instruments. 4

5 CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below: HEAD OFFICE: MUMBAI Mr. D.R. Dogra Managing Director Mobile : dr.dogra@careratings.com Ms. Meenal Sikchi Vice President Bank Loan & Instrument Rating Mobile: mail: meenal.sikchi@careratings.com Mr. Rajesh Mokashi Dy. Managing Director Mobile rajesh.mokashi@careratings.com Mr.Ankur Sachdeva Vice President Banking & Financial Services Mobile: ankur.sachdeva@careratings.com CREDIT ANALYSIS & RESEARCH LTD. HEAD OFFICE 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: care@careratings.com Fax: KOLKATA Ms. Priti Agarwal Cell: Tel: / 1602 E- mail: priti.agarwal@careratings.com 3rd Flr., Prasad Chambers (Shagun Mall Bldg), 10A, Shakespeare Sarani, Kolkata CHENNAI Mr. V Pradeep Kumar Cell: Tel: / Fax: pradeep.kumar@careratings.com Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai AHMEDABAD Mr. Mehul Pandya Cell: Tel: Fax: mehul.pandya@careratings.com 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad NEW DELHI Ms. Swati Agrawal Cell: Tel: / swati.agrawal@careratings.com 3 rd Floor, B -47, Inner Circle, Near Plaza Cinema, Connaught Place, New Delhi BENGALURU Mr. Dinesh Sharma Cell: Tel: / Tele fax: dinesh.sharma@careratings.com Unit No , 11 th Floor, Prestige Meridian II No-30, M.G. Road, Bengaluru HYDERABAD Mr. Saikat Roy Tel: saikat. roy@careratings.com 401, Ashoka Scintilla , Himayat Nagar Hyderabad PUNE Mr. Rahul Patni Cell: Tel: rahul.patni@careratings.com 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune JAIPUR Mr. Rahul Jain Cell: Tel: /14 rahul.jain@careratings.com 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur