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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Fixed Deposits (FD) | 20.00 | ACUITE A | Stable | Assigned | - |
| Total Outstanding | 20.00 | - | - |
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Erratum: In the original PR dated February 02, 2024, rating action in the Rating Rationale |
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Rating Rationale |
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Acuité has assigned the long-term rating of ‘ACUITE A’ (read as ACUITE A) on the Rs. 20.00 cr. fixed deposit program of Manipal Housing Finance Syndicate Limited (MHFSL). The outlook is ‘Stable’.
Rationale for the rating The rating continues to factors in MHFSL’s established presence in its areas of operations, experienced management and institutional support and representation on board of MHFSL by them. MHFSL’s capital structure remains healthy with Capital Adequacy Ratio (CAR) of 36.47 percent as on September 30, 2023 (32.22 percent as on September 30, 2022) and has demonstrated the ability to attract funding from banks and financial institutions at a competitive rate of interest. Acuité believes that the company is well positioned to benefit from the demand for housing finance and centralized in-house credit appraisal/ monitoring processes. Further, the company has increased its disbursements in the gold loan segment which has relatively shorter tenure and higher yields. In FY23, the disbursements towards the gold loan segment stood at 62 percent of the overall disbursements. (63 percent for H1FY24). The rating, however, remains constrained by the modest scale of operations and muted growth despite being in housing finance segment for over 3 decades. The CAGR for 3 years on the portfolio stood at negative 0.36 percent as on FY23. Also, the business operations were geographically concentrated with around 99 percent of the loan portfolio concentrated in Karnataka as on September 30, 2023. |
| About the company |
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Karnataka based Manipal Housing Finance Syndicate Limited (MHFSL) was incorporated in 1986 as a Public Limited Company by the Manipal Group in association with Syndicate Bank (now known as Canara Bank). The company is jointly promoted by Syndicate Bank and Manipal Group. Manipal Group holds 61.38 percent stake while Syndicate Bank holds around 7.05 percent stake in the company as on March 31, 2023. The company is led by Mr. T Sunil Pai. MHFSL is a deposit accepting Housing Finance Company registered with National Housing Bank (NHB) and is engaged in extending housing loans for purchase, construction, repairs and renovation of residential units largely to individuals. In addition to housing loan, MHFSL also extends mortgage loans and gold loans. MHFSL operates through its network of 42 branches spread across states of Karnataka, Tamil Nadu, Telangana and Maharashtra as on September 30, 2023.
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| Unsupported Rating |
| Not applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of MHFSL to arrive at the rating.
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| Key Rating Drivers |
| Strength |
| Established presence in housing finance segment
MHFSL was incorporated in 1986 by the Manipal Group and Syndicate Bank. MHFSL is a deposit accepting housing finance company and is registered with National Housing Bank. The company is engaged in extending housing loans, mortgage loans and gold loans. MHFSL has established its presence as a housing finance company, especially in Karnataka and caters to urban areas. The company majorly operates in Karnataka with majority of housing and mortgage loans and all of gold loans originating from the said state. The company benefits from its established presence in its area of operations with moderate growth and healthy asset quality. The company’s portfolio stood at Rs. 457.64 Cr. as on March 31, 2023 as compared to Rs. 436.02 Cr. as on March 31, 2022 The AUM stood at Rs 453.21 Cr. as on September 30, 2023. The company is headed by Mr. T Sunil Pai who is supported by seasoned professionals and directors nominated on board by Syndicate Bank. The prudent underwriting policies adopted by the management has enabled the company to maintain a sound asset quality with on-time portfolio at ~93 percent as on September 30, 2023 and gross nonperforming assets (GNPA) at 1.98 percent (improved from 2.42 percent as on September 30, 2022). Acuité believes that the company will benefit from its experienced promoters and established presence in the financial services industry. Healthy financial risk profile MHFSL’s networth stood at Rs. 102 Cr. as on March 31, 2023, and reported a healthy capital adequacy ratio (CAR) of 34.59 percent majorly comprising Tier 1 capital. The company’s leverage indicators have also improved to 3.33 times as on September 30, 2023 as compared to 3.66 times as on September 30, 2023 on the back of improved networth supported by retained earnings. The company has a strong lender profile comprising Banks and Financial Institutions, with total outstanding borrowings of ~ Rs. 361 cr. outstanding as on September 30, 2023. MHFSL’s profitability indicators are healthy marked by Net Interest Margin (NIM) which stood at 5.98 percent for FY23 improving from 5.72 percent as on March 31, 2022 (5.22 percent as on March 31, 2021) on the back of improved cost of borrowing. Acuité believes that the company’s comfortable capitalization levels will support its growth plans over the medium term |
| Weakness |
| Moderate growth in business operations with geographic concentration
MHFSL has been engaged in housing finance segment for over 3 decades. The company extends home loans and mortgage loans having an average tenure of 14-15 years. MHFSL also forayed into extending gold loans with a tenure of 1 year. MHFSL has been growing its business moderately with outstanding loan portfolio of Rs. 457.64 Cr. as on March 31, 2023 as compared to Rs. 436.02 Cr. as on March 31, 2022. The AUM stood at Rs 453.21 Cr. as on September 30, 2023. The CAGR for 3 years on the portfolio stood at negative 0.36 percent as on FY23. This has been focusing on expanding its presence in its established area of operations, this has resulted the company in maintaining very low operating expenses to earning assets in the range of 1.20 to 1.30 percent over the past 3 financial years. The company has not been aggressive on growth and has been focusing towards maintaining healthy asset quality. MHFSL has been able to maintain its asset quality with on time portfolio at around ~93 percent as on September 30, 2023. MHFSL majorly operates in the state of Karnataka. With a network of 42 branches the company extends housing loans and mortgage loans only through its 6 branches and rest 34 branches extend gold loans and help in sourcing of housing and mortgage loans. A major portion of the portfolio comprises of housing and mortgage loans and gold loans constituting the rest. The company’s operations are majorly concentrated in Karnataka. Acuité believes, going forward, the ability of the company to mobilize additional funding through debt /equity and its ability to deploy the funds profitably while maintaining its asset quality will be key rating sensitivity. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
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MHFSL’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated September 30, 2023. The company has maintained cash and bank balances of ~Rs. 8.6 Cr. as on September 30, 2023.
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| Outlook: Stable |
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Acuité believes that MHFSL will maintain a ‘Stable’ outlook over the near to medium owing to established track record supporting its operational performance while maintaining asset quality. The outlook may be revised to ‘Positive’ in case of higher than envisaged growth in loan portfolio while maintaining profitability and asset quality metrics. Conversely, the outlook may be revised to ‘Negative’ in case of any deterioration in leverage indicators, asset quality or profitability metrics.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Net Interest Income plus other income.
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| Status of non-cooperation with previous CRA (if applicable): |
| None |
| 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 • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Fixed Deposit Programmes: https://www.acuite.in/view-rating-criteria-64.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm |
| Note on complexity levels of the rated instrument |
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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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