Vastu Housing Finance Corporation Limited

Transcription

1 Rating Rationale Vastu Housing Finance Corporation Limited 16 Aug 2018 Brickwork Ratings assigns and reaffirms rating for the various debt issues amounting to Rs. 900 Crores of Vastu Housing Finance Corporation Limited ( VHFCL or the Company ) Brickwork Ratings (BWR) assigns and reaffirms the rating of Vastu Housing Finance Corporation Limited ( VHFCL or the Company ) as detailed below: Instrument Proposed NCD Previous Amount (Rs. Cr) Present Amount (Rs. Cr) O/s Amount (August 2018) Tenor Rating History (Feb 2018) NA NA NA NA NCD Months Bank Loan Nil NA /Stable /Stable Total INR Nine Hundred crores only Rating (Reaffirmation) (Reaffirmation) * Please refer to BWR website for definition of the ratings ****The proposed bank loan has been reduced to that is to be availed from various banks. The NCD amount has been enhanced with another, and therefore, the total exposure remains same as was rated initially in February #ISIN particulars of the issued NCD of Rs. 200 Cr: Particulars Secured Redeemable Non -Convertible Debentures- Series A: Rs. 50 Cr ISIN: INE459T07025 Secured Redeemable Non-Convertible Debentures- Series B Aggregating Rs. 50 Cr ISIN: INE459T07033 Secured Redeemable Non-Convertible Debentures- Series C Aggregating Rs. 40 Cr ISIN: INE459T07041 Secured Redeemable Non-Convertible Debentures- Series D Aggregating Rs. 60 Cr ISIN: INE459T Aug 2018

2 Rationale/Description of Key Rating Drivers/Rating sensitivities: The rating has factored, inter alia, experienced & professional management in place, comfortable capitalisation with continuous committed funding support from funds advised by Multiples Alternate Asset Management Private Limited (Multiples) (holds 85.7% of VHFCL) as and when required. The rating also takes into account the growing business due to expansion of operations, growth of loan book driven by strong processes technology and innovation led data capture and on field underwriting backed by quality verifications, bureau analytics and disciplined execution and conservative gearing policy. The rating is constrained by, moderate scale of operations, low seasoning of its portfolio and significant competition in the HFC landscape. Analytical Approach: Risk profile of VHFCL is evaluated on a stand-alone basis. Although, the support from the majority shareholders is taken note of. Key Risk Drivers: Ownership and Management: VHFCL is majorly held by funds advised by Multiples (85.7% of shareholding). The shareholders have experience and track record in financial services sector and scaling up businesses across various asset classes. The founder team and senior management also have good repute and vast experience in managing large retail finance businesses. The lead shareholder has a strong oversight of VHFCLs s board, and is actively involved in driving strategic and growth directives. Comfortable capitalisation with continuous committed funding support from funds advised by Multiples Alternate Asset Management Private Limited (Multiples): The Company has a comfortable capital position with a net worth of Rs crores and Total CRAR of 80.92% (majority being Tier I: 79.87%) as on March 31, Multiples; the majority shareholder with 85.7% stake in the company, is committed to regularly infuse capital as it deems appropriate to support credit growth while maintaining the capital structure of the company. The fund has an ability to invest upto USD 100 million in VHFCL, out of which USD 46 million has been already invested. Technology: VHFCL s keen focus on technology has resulted in the setup of a dedicated technology team which has enabled a robust platform focused on driving seamless paperless credit decisioning for mortgages. The platform has been designed to keep up with the everchanging market needs and requirements of consumer lending and digital underwriting leveraging big data. Industry prospects: Housing Finance industry has been growing significantly over the last several years, with the NHB recognized entities competing with commercial banks. The field has many players big and small, and is highly competitive. VHFCL is a new player, and hence its ability in placing itself as an efficient and agile player, with attractive terms in its products, needs to be monitored. However, VHFCL can leverage on the existing management and ownership structure. Though the company was incorporated in 2005, the growth in its portfolio has happened since December 2015 after the change in the ownership and management of the company as approved by NHB in August Its scale of operations remains moderate with a loan book of Rs crores as of March 31, 2018 spreading its operations across 34 operational branches in 10 states with a team of 461 employees. Housing Loans, by nature are for long duration, and as such its 2 16 Aug 2018

3 portfolio is not seasoned adequately. However there are hardly any delinquencies in the new portfolio, established since December, Managing asset quality with efficient collection is an important aspect of the company s business and there is capability, focus and investments which have been made in this area. VHFCL has a conservative gearing policy and would maintain the leverage of 3-7 times over the medium term, however, not expected to exceed over 5 times in the next few years. Rating BWR believes VHFCL s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of rating change over the medium term. Asset quality & NIM are the key monitorables. Going forward, scaling up of operations in the competitive business of housing finance industry and any significant deterioration in asset quality or volatility in profitability with impact on capitalization would be the key rating sensitivities. About the Company Vastu Housing Finance Corporation Limited (VHFCL or the company) is a housing finance company, incorporated in 2005 which was subsequently acquired, in August 2015 by professionals from the Financial services space backed by capital from Institutional and individual investors of repute.the company believes technology would be a cornerstone of its operations and has set up a management team with relevant market experience across multiple asset classes. It is primarily engaged in the affordable housing segment with an average ticket size of Rs Lakhs. VHFCL is currently focused on supporting the mortgage finance needs of individuals spread across the self-employed and salaried segment. Housing loans (including home improvement and extension loans) account for around 65-75% of the loan book, with the remaining 25-35% comprising of non-housing loans (mainly loan against property). Ms. Renuka Ramnath is the Chairman of VHFCL. In addition to Ms.Ramnath the Board comprises Mr. P H Ravikumar, Mr. Sandeep Menon, Mr. G S Nayak, Mr. Sudhir Variyar,Mr.Vijay Kumar and Mr. Samir Bhatia as Directors. They are all seasoned Banking and Financial services professionals with strong domain and institution building track record. The Company has a team of well-qualified and experienced professionals looking after credit, risk, marketing, audit and other support functions. Proposed NCD issue details The proposed issue size of the secured NCD rated is, out of which, currently the company is proposing to issue Rs. 200 Cr of NCD (Rs. 100 Cr + Rs. 100 Cr). The company will be issuing Secured, Listed/Unlisted debentures of different tenors in multiple tranches. Company s Financial Performance The company s outstanding loan portfolio as of March 31, 2018 was Rs Crores compared to Rs Crores, as of March 31, 2017, registering a significant growth. Composition of Home loans segment stood at ~70% of VHFCL s loan portfolio followed by Loan against Property with ~30% share in FY18. As of March 31, 2018, the Gross NPA of the Company was 0.00% (0.00% as of March 31, 2017) Aug 2018

4 For FY18, Total Income for the Company stood at Rs Crores compared to Rs Crores in FY17, while Net Interest Income increased from Rs Crores in FY17 to Rs Crores in FY18. The Net Interest Margin remained stable at 8.26% in FY18. The PAT has improved to Rs Cr in FY18 from Rs Cr in FY17, on account of increase in the operations. VHFCL s Tangible Net Worth has increased to Rs Crores in FY18 from Rs Crores in FY17, majorly on account of infusion of funds by the promoters and rest through retention of profits. VHFCL s capital adequacy in the form of CRAR stood at 80.92% as of March 31, For short to medium term, the company has a comfortable liquidity position and in general HFCs have mismatches in the long term, which they need to manage appropriately. The company stipulates floating rates of interest for its loans, and hence, can pass on the varying cost of its borrowings to its customers. In its Q1FY19, on a provisional basis, the company has achieved a total income of Rs Cr with a PAT of Rs Cr. The outstanding loan portfolio has improved further to Rs Cr during the same period. As of June 30, 2018, the Gross NPA of the Company was 0.13%. Key Financial Figures: Financial Ratios FY16 (A) FY17 (A) FY18 (A) Loan Portfolio Outstanding (Rs. Cr) Gross NPA % 30.02% 0.00% 0.00% Net NPA % 4.51% 0.00% 0.00% Net Interest Income (Rs. Cr) PAT (Rs. Cr) Net Interest Margin (NIM) 2.73% 9.33% 8.26% Tangible Net Worth (Rs. Cr) CRAR % 96.02% 80.92% 4 16 Aug 2018

5 Rating History for the last three years: Sl. No. Instrume nt/ Facility Current Rating (August 2018) Previous Rating (Feb 2018) Rating History Proposed Secured NCD Secured NCD Proposed Bank Facilities - Outlook: Stable Rs. 600 Cr Outlook: Stable Reaffirmati on NA Total Rs. 900 Cr Rs. 900 Cr INR Nine Hundred Crores only Hyperlink/Reference to applicable Criteria General Criteria Banks & Financial Institutions Analytical Contacts AP Kamath GM - Ratings analyst@brickworkratings.com Media media@brickworkratings.com Relationship Contact bd@brickworkratings.com Phone: For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at Investors queries can be sent to info@brickworkratings.com Aug 2018

6 About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated debt instruments/bonds/bank loans, securitized paper of over 11,99,663 Cr. In addition, BWR has rated over 6819 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over 48,803 Cr have been rated. BWR has rated over 30 PSUs/Public Sector banks, as well as many major private players. BWR has a major presence in ULB rating of nearly 102 cities DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons Aug 2018