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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1750.00 | ACUITE AA- | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 330.00 | ACUITE AA- | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 200.00 | Not Applicable | Withdrawn | - |
| Non Convertible Debentures (NCD) | 100.00 | PP-MLD | ACUITE AA- | Stable | Reaffirmed | - |
| Commercial Paper (CP) | 150.00 | - | ACUITE A1+ | Reaffirmed |
| Total Outstanding | 2330.00 | - | - |
| Total Withdrawn | 200.00 | - | - |
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Rating Rationale |
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Erratum: In the original PR dated 03 July 2023, the rating history was not reflected, which has been captured in this version of the PR.
Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 1750.00 Cr. bank facilities of Ambit Finvest Private Limited (AFPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 330.00 Cr. on the facility of non-convertible debentures of Ambit Finvest Private Limited (AFPL). The outlook is ‘Stable’. Acuité has reaffirmed the long term rating of ‘ACUITE PP-MLD AA-’ (read as ACUITE Principal Protected Market Linked Debentures double A minus)’ on the Rs. 100.00 Cr. PP-MLD facility of Ambit Finvest Private Limited (AFPL). The outlook is ‘Stable’. Acuité has reaffirmed the short term rating of ‘ACUITE A1+’ (read as ACUITE A one plus) on the Rs. 150.00 Cr. proposed commercial paper program of Ambit Finvest Private Limited (AFPL). Acuité has withdrawn its rating on the Rs.200 Cr principal protected market linked debentures of AMBIT FINVEST PVT LTD. The rating is withdrawn on account of the request received from the company as the raised debt security has been repaid and redemtion letter received from NSDL. The withdrawal is as per Acuité’s policy on withdrawal of ratings. Rationale for the rating The rating continues to factor in AFPL’s experienced management, significant support from marquee investors and strong resource raising ability. The rating also takes into consideration the diversified business profile as well as the established presence of Ambit Group in investment banking and asset management businesses supported by strong management and wide base of institutional clients. The capital infusion in FY2020 from the marquee investor, Poonawalla Group has resulted in healthy capitalization levels and low leverage at AFPL along with stronger ability to raise funds from banks and financial institutions. At a consolidated level, Ambit Group’s networth stood at Rs. 1124.56 Cr. with a leverage of 1.68 times as on March 31, 2023. Acuité has also noted the shift in AFPL’s business strategy from structured finance book to a more granular SME lending which is expected to provide some cushion against asset quality shocks going forward. Some of these rating strengths however, are constrained by the geographic concentration and low seasoning of AFPL’s SME portfolio. The rating also takes into consideration the decline in on-time portfolio and rise in lower bucket delinquencies which is in line with the prevailing challenges faced by SME in the wake of pandemic. On a consolidated level, the earnings quality of Ambit Group is susceptible to volatility since a significant portion of its revenues is dependent on capital market conditions. |
| About the company |
| Incorporated in 2006, Ambit Finvest Private Limited is the systematically important NonBanking Financial Company (ND-SI NBFC) of Ambit Group. AFPL commenced its lending business in structured finance segment in 2011. Later, AFPL acquired the SME loan book of Finmax Credit & Finance Private Limited in September 2018 and commenced its SME lending business. Going forward, the company would only be focusing on SME and Retail segment and has plans to down size the structure finance portfolio. |
| About the Group |
| Mumbai based Ambit Private Limited (APL), the holding company of the Ambit Group was incorporated in 1997 and has diversified line of business operations across various fund based and non-fund based businesses. Ambit Group is promoted by Mr. Ashok Wadhwa and offers customized solutions in the areas of Investment Banking (Corporate Finance and Equity Capital Markets), Institutional Equities & Research, Asset Management, Wealth Management and SME Lending. The Ambit Group comprises Ambit Private Limited and its 12 subsidiaries (as on March 31, 2023). Ambit group has pan India presence and has a global footprint with offices in Singapore and USA. |
| Unsupported Rating |
| Not Applicable |
| Extent of Consolidation |
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•Full Consolidation Rationale for Consolidation or Parent / Group / Govt. Suppor Acuité has considered the consolidated view on the business and financial risk profile of Ambit Private Limited and its subsidiaries Ambit Finvest Private Limited and others to arrive at the rating (for list of subsidiaries as on March 31, 2023 refer Annexure 2). The approach is driven by common management, shared brand, and strong operational and financial synergies between the group companies. |
| Key Rating Drivers |
| Strength |
| Experienced management, team driving portfolio growth at AFPL
Ambit Finvest Private Limited (AFPL) is led by Mr. Sanjay Sakhuja (Executive chairman) who has been associated with the Ambit group since 2003. Mr. Sakhuja is supported experienced professional team comprising Mr. Sanjay Agarwal (CEO), Mr. Vikrant Narang (Deputy CEO) and Mr. Sanjay Dhoka (COO & CFO). Mr. Sanjay Agarwal heads the SME lending operations and has over two decades of experience in SME lending segment. The board also comprises independent directors Mr. K M Jayarao (ex Head – Global Credit Risk Management Group at ICICI Bank), Mr. Ameet Parikh and Ms. Shalini Kamath. The company also gains from expertise of senior advisor like Mr. Sunil Gulati (ex CRO at RBL Bank) AFPL was a captive NBFC of Ambit Group till August 2018, having an exposure to mostly structured finance segment. However, post fund raising the company has changed its lending strategy whereby it is significantly expanding its SME portfolio and has curtailed structured finance. AFPL has demonstrated growth in its scale of operations by expanding its network of branches to 150 across 11 states as on Mar 31, 2023. AFPL’s outstanding loan portfolio (AUM) stood at Rs. 2681.65 crore as on Mar 31, 2023 from Rs. 1458.88 crore as on March 31, 2022. The growth in portfolio was on account of healthy disbursements in FY2022 & FY2023 at around Rs. 976 Cr. and Rs. 1,800 Cr. respectively. AFPL’s owned outstanding loan portfolio of Rs. 2,279.65 Cr. comprised SME portfolio of Rs. 2,254 Cr. (98 percent of AUM) and Structured Finance portfolio of Rs. 25.6 Cr. (2 percent of AUM) as on Mar 31, 2023. Acuité expects AFPL to maintain the growth momentum in its SME portfolio while diversifying its geographical reach. Funding from marquee investor, comfortable capitalization levels AFPL’s networth stood at Rs. 703.03 Cr. as on March 31, 2023 (Rs. 668.02 Cr. as on March 31, 2022) and Rs. 641.32 as on March 31, 2021. During FY2020, Adar Poonawalla (CEO- Serum Institute of India) invested around Rs. 234.63 Cr. in AFPL for a 24.9 percent stake. The investment was done through affiliate companies namely Rising Sun Holdings Private Limited and Jeevadravya Bio-Pharma Private Limited. Post infusion and due to inherent risks in wholesale lending, the company has stopped structured lending and has been focusing on growing its SME and retail book. In addition to being high-yielding, SME and retail portfolio shall provide granularity to AFPL’s portfolio and help mitigate credit risk. The capitalization levels post equity infusion stood comfortable to support expansion plans of the company. AFPL’s Capital Adequacy Ratio (CAR) stood comfortable at 27.61 percent as on March 31, 2023 (38.45 percent as on March 31, 2022), the reduction in CAR is on account of healthy disbursement levels, resulting growth in AUM. AFPL’s gearing stood at 2.61 times as on March 31, 2023 (1.61 times as on March 31, 2022). Acuité believes that the company’s comfortable capitalization levels will support its growth plans over the medium term. Strong brand name and diversified business profile Ambit Group is an established brand with presence in investment banking, institutional equities, asset management, global private client and SME lending businesses. Mr. Ashok Wadhwa is the Group Chief Executive Officer and founder of Ambit Group. He is recipient of several awards, including the Priyadarshini Academy award for outstanding contribution in the field of financial management. Within the investment banking segment, Ambit is consistently ranked amongst the top 10 M&A advisory firms in India. The group has advised over 160 transactions. Ambit has strategic business alliance with Daiwa Securities Group Inc., Japan for M&A advisory services in IndoJapan corridor and also has backing of QInvest to develop cross border M&A advisory services between MENA region and India. The group also caters to Mutual Fund, Insurance companies and FIIs. Ambit Finvest Private Limited (AFPL) the NBFC arm of the Ambit Group has a presence in SME and retail lending segment. Ambit Private Ltd (APL), the holding company along with the senior management hold around 65 percent stake in AFPL. It draws strength from common brand name, capital and management support. Over the last few years, AFPL has received funding support from the parent at regular intervals. It also benefits from operational synergies in the form of established corporate governance set up at group level and integration of support functions like accounting, finance, human resources. Acuité believes, Ambit group’s established position in financial services and diversified fund based and non-fund based business operations will continue to support its business risk profile Healthy Earnings Profile At group level, the businesses can be categorized into fund based (comprising revenues from lending portfolio) which comprised ~47 percent of total FY2023 revenues and fee based (which includes Corporate Finance, Institutional Equities, Asset Management, Merchant Banking) which comprised ~53 percent of total FY2023 revenues, at around similar levels for FY2022. While fund based revenues at AFPL levels have grown during FY2022 and FY2023 on account of portfolio growth, fee based revenues during FY2023 declined on account of impairment in investment portfolio. On standalone basis, AFPL’s profitability indicators were healthy marked by Net Interest Margin (NIM) which stood at 9.93 percent as on March 31, 2023 on the back of healthy disbursements in Q3 & Q4 FY2023 at ~Rs. 710 Cr. Return on Average Assets (RoAA) has marginally declined to 1.48 percent as on March 31, 2023 from 1.72 percent as on March 31, 2022 due to increase in operating costs and Credit Cost. Similarly, Opex further increased by more than 90% on account of expansion of branch networks. Annualized Opex for H1 FY2023 remained high at 6.80 percent while NIM and RoAA marginally improved to 10.10 percent and 1.76 percent respectively. Acuité believes the earning profile of Ambit Group from the non-fund based business operations would remain susceptible to inherent risks in capital market and overall economic environment, while its fund based business operations would continue to drive the group’s future growth trajectory. |
| Weakness |
| Relatively low seasoned portfolio; moderate asset quality
AFPL commenced its operations in structured finance business in 2011 and the company has stopped disbursements in this segment post equity infusion since March 2020. Further, AFPL commenced its SME lending operations after acquiring the SME portfolio from Finmax in September 2018 and would be focusing on the SME and Retail segment going forward. Loans offered under SME lending have an average tenure ranging between 1-3 years for unsecured loans and 10-15 years for secured loans. Unsecured loans comprise 30-35 percent of the total SME portfolio while rest are secured. The company’s loan book of Rs. 2,279.6 Cr. as on March 31, 2023 has grown significantly from Rs. 1,333 Cr. as on March 31, 2022. Due to substantial growth in SME book in the last few years, ~ 85 percent of the overall portfolio had a seasoning of less than two years as on March 31, 2023. The company has geographical concentration in states of Maharashtra, Delhi and Gujarat (incl. Head Office) with the same constituting 69 percent of o/s SME portfolio and significant presence in large urban centers. AFPL is making concentrated approach to diversify its geographical presence and has expanded its branch network from 30 branches as on March 31, 2021 to 150 branches as on March 31, 2023. Along with this, the company is also targeting penetration in Tier 2 and Tier 3 cities while adding customized products in its offerings. AFPL reported significant growth in portfolio while maintaining asset quality with on-time portfolio at 93.18. percent, gross non-performing asset (GNPA) at 2.24 percent and nonperforming asset (NPA) at 1.33 percent as on March 31, 2023. AFPL had conservative outstanding ECL provisions of Rs. 45.61 Cr. as on March 31, 2023. The company made a write off of Rs 17.01 Cr in FY 2023 as compared to Rs 5.87 Cr in FY2022 and has also made provisions of Rs 12.47 Cr as compared to Rs1.39 Crs in FY2022. Acuité believes that the company’s ability to maintain its asset quality given the low seasoned SME loan book and increased presence in the newer geographies will remain a key rating monitorable. |
| ESG Factors Relevant for Rating |
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Ambit Private Limited (APL), has a diversified revenue stream with a majority portion accruing from the financial services sector. Adoption and upkeep of strong business ethics is a sensitive material issue for the financial services business linked to capital markets to avoid fraud, insider trading and other anti-competitive behavior. Other important governance issues relevant for the industry include management and board compensation, board independence as well as diversity, shareholder rights and role of audit committee. As regards the social factors, product or service quality has high materiality so as to minimise misinformation about the products to the customers and reduce reputational risks. For the industry, retention, and development of skilled manpower along with equal opportunity for employees is crucial. While data security is highly relevant due to company’s access to confidential client information, social initiatives such as enhancing financial literacy and improving financial inclusion are fairly important for the financial services sector. The material of environmental factors is low for this industry. The company’s board comprises of a total of nine directors out of which three are independent directors and three are non-executive directors. APL maintains adequate disclosures with respect to the various board level committees mainly audit committee, nomination and renumeration committee along with stakeholder management committee. APL also maintains adequate level of transparency with regards to business ethics issues like related party transactions, investors grievances, litigations, and regulatory penalties for the group, if relevant. In terms of its social impact, APL is actively engaged in community development programmes through its CSR committee. |
| Rating Sensitivity |
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| All Covenants |
| AFPL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality, among others. |
| Liquidity Position |
| Adequate |
| AFPL’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated March 31, 2023. The company has maintained unencumbered Cash and bank balances and bank deposits of around Rs. 115 Cr. as on Mar 31, 2023. The borrowing profile of AFPL of ~Rs. 1,791 Cr. as on Mar 31, 2023 comprised Term loans (~82 percent) from Banks and NBFC/FIs, MLD’s & NCD’s (~14 percent). As per ALM statement, the company has debt servicing obligations of ~Rs. 59 Cr. over the period of one year. AFPL’s total collection efficiency for scheduled demand for six months ended Mar 2023 was 96 percent. The Group on a consolidated basis had maintained liquidity buffers of Rs. 298 Cr. as unencumbered cash and cash equivalents as on March 31, 2023. |
| Outlook: Stable |
| On account of AFPL’s steady scale up in lending operations with focus on granular SME loan portfolio and comfortable capitalization along with synergies with the Ambit group and the Group’s diversified business risk profile, Acuité maintains a ‘Stable’ outlook. The outlook may be revised to ‘Positive’ if there is a significant increase in the scale of the business along with sustained improvement in profitability while maintaining asset quality at AFPL and significant revenue and business growth of Ambit Group. The outlook may be revised to ‘Negative’ in case of sustained pressure on earnings/profitability indicators or asset quality of AFPL and lower than expected business growth of Ambit group. |
| Other Factors affecting Rating |
| None |
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| Status of non-cooperation with previous CRA (if applicable): |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm |
| Note on complexity levels of the rated instrument |
| In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in. |
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