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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 225.00 | ACUITE A+ | Stable | Upgraded | - |
| Total Outstanding | 225.00 | - | - |
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Erratum: This press release publishes a rectification of an inadvertent typographical error in the Rating Rationale |
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Rating Rationale |
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Acuité has upgraded the long-term rating from ‘ACUITE A’ (read as ACUITE A) to 'ACUITE A+' (read as ACUITE A Plus) on Rs. 225.00 Cr. bank facilities of APAC Financial Services Private Limited (AFSPL). The outlook will remain ‘Stable’. Rationale for the rating The rating factors in the sustained increase in scale of operations with improvement in earning profile and the healthy capilaziation levels in FY24. APAC's AUM grew ~ 51 % to Rs. 1591.59 Cr. as on March 31, 2024 from Rs. 1052.17 Cr. as on March 31, 2023. The earning profile also saw an improvement with PAT levels at Rs. 61.72 Cr. for FY 24 as compared to Rs. 23.97 Cr. for FY 23. The disbursal volume for APAC also saw an improvement while maintaining a healthier asset quality compared to FY23 with GNPA and NNPA levels at 0.81 % and 0.53 % as on March 31, 2024 respectively. The rating continue to factor in the experienced management team supported by presence of seasoned investors/funds. The rating continues to factor in comfortable gearing levels of APAC at 1.11 times as on March 31,2024 as against 1.38 times as on March 31,2023. Moreover the rating considers the healthy capitilization in FY24 where the firm infused Rs 400 Cr. from quality institutional investors such as Creador, Norwest Capital LLC. The rating further factors in the comfortable liquidity profile for the medium term and the increase in the granularity of portfolio through a planned expansion of APAC branches within the chosen geographies. The rating, however, continues to be constrained by limited track record in building and managing a retail portfolio. Given that the portfolio has grown by ~51% in FY24,the majority portfolio has limited seasoning and the performance has to be monitored. Acuité believes that the ability of the company to deploy the funds across various asset classes while maintaining an optimal risk return trade-off will remain key monitorable. . |
| About the company |
| APAC Financial Services Private Limited (APAC) is a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI). It predominantly provides secured granularloans to micro and small enterprises. The company received its certificate of registration as a non-deposit taking NBFC from the RBI on February 21, 2018. APAC had a wholly-owned subsidiary –APAC Housing Finance Private Limited (APAC HFPL), which was registered as a housing finance company (HFC)in May 2018 with National HousingBank (NHB). However, the HFC was merged into the parent,w.e.f. January 29, 2024, post receipt of requisite regulatory approvals, including final approval from the National Company Law Tribunal (NCLT), Mumbai Bench, vide the order dated January 11, 2024. The company is engaged in extending credit to Micro Small and Medium Enterprises (MSMEs). The company has 30,813 customers across 146 branches in six states as on March 31, 2024 compared to 20,184 customers and 122 branches as on March 31, 2023. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered a standalone approach to the business and the financial profile of APAC Financial Services Pvt. Ltd. to arrive at the rating |
| Key Rating Drivers |
| Strength |
| Seasoned Management Team supported by reputed investors: APAC commenced its operation in FY2018. As on March 31, 2024, Mr. Gunit Chadha, the founder promoter, held 42.46% of the stake in AFSPL. Multiples Private Equity Fund & Plenty Private Equity Fund collectively hold 32.78% in AFSPL and investors such as Norwest Capital LL and Creador both own 9.67% each. AFSPL currently has its board of directors comprising of Mr. Gunit Chadha who has occupied top positions such as CEO of Deutsche Bank (Asia Pacific region) and CEO of IDBI Bank. The other members of the board include Mr. Shankar Dey, a seasoned banking and finance professional with over four decades experience in BFSI sector. The board also has Ms. Nithya Easwaran, who has over two decades experience in financial services and is also the Managing Director of Multiples Alternate Asset Management Company Limited (Multiples). The board also have Mr. Sanjay Maliah, Mr. Sanjay Athalye, Mr. Neeraj Bhai all having more than two decades of experience in BFSI and other industries and Mr Robin Agarwal having over a decade of experience across Private Equity and Consulting.,Besides the Board members the firm also relies on the expertise of seasoned professionals such as Ms. Varsha Purandare & Mr. Arijit Chanda who are the independent members of the credit committee. Ms. Varsha has over three decades experience in banking and has occupied senior positions including ex-Chief Credit & Risk Officer, SBI group in her career. Mr. Arijit has 29 years of financial services experience, including in start-ups, in risk, credit and collections across Citi Group, Fullerton etc. Comfortable Capitalization Profile and improved profitability metrics APAC's gearing levels are low at 1.11 times as on March 31,2024 (1.38 times as on March 31,2023) since the operations are largely funded by equity. The CAR on levels stood at 40.89%. The networth stood at Rs. 948.73 Cr. as on March 31,2024 (Rs. 488.53 Cr. as on March 31,2023), while the debt stood at Rs. 1050.90 Cr. as on March 31,2024 (Rs. 674.60 Cr. as on March 31,2023).. The PAT for FY23 stood at Rs. 23.97 Cr which grew to Rs. 61.72 Cr. in FY24. The RoAA and NIM on the level stood at 3.84% and 12.49% respectively as against 2.62% and 14.16% for FY23. Acuité believes that APAC Group will continue to benefit from its experienced management and continued support from its investors. Moreover capital has been infused from quality soruces such as Creador and Norwest Capital LLC which has given the firm further flexibility to operate their disbursements. AFSPL focuses on business loan segment which extends credit to MSMEs, which are secured in nature. Moreover the asset quality is healthy and the portfolio is granular. |
| Weakness |
| Limited seasoning of the new portfolio and risk inherent to MSME Sector: The portfolio grew by ~51% Y-o-Y and healthy disbursements of Rs 800.94 crs were done in FY2024. APAC's AUM stood at Rs. 1591.59 Cr. as on March 31, 2024. The portfolio has less seasoning and the performance of the new portfolio created has to be monitored. APAC is fairly diversified with presence in 6 states with major focus towards the MSME segment. Occurrence of events such as slowdown in economic activity or shifting of activity to other geographies could impact the cash flows of the borrowers, thereby impacting credit profile of APAC. Acuité believes that the company’s ability to maintain its asset quality given the low seasoned loan book and increased presence in the newer geographies will remain a key rating monitorables. |
| ESG Factors Relevant for Rating |
| APAC has significant Institutional ownership with policies and processes in place to ensure transparent, fair & ethical conduct with its Customers and other stakeholders. Empowerment, Innovation & Excellence, Governance, Respect & Integrity and Collaboration are part of APAC’s core values. APAC has two independent directors in its Board & constituted board committees such as Risk Management Committee, Audit Committee, Nomination and Remuneration Committee, IT Strategy Committee and CSR Committee to ensure high governance standards. Also, APAC’s credit committee has two independent members with more than two decades of experience across financial services. |
| Rating Sensitivity |
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-Sustaining Scale up in business operations -Maintaining granularity in the portfolio -Changes in Asset quality -Maintenance of adequate Liquidity |
| Liquidity Position |
| Adequate |
| APAC’s liquidity profile remains adequate with positive cumulative mismatches in the 1-year bucket. The company had borrowings outstanding of Rs. 1,050.90 crore as on March 31, 2024. It had an unencumbered cash and bank balance of Rs. 116.3 crore and liquid investments of Rs. 303.4crore as on that date, augmented by the capital infusion in March 2024. Further, APAC had undrawn working capital limits of Rs. 37 crore as on March 31, 2024 with cumulative debt repayment obligations of Rs. 382.2crore for the next oneyear. The on-balance sheet liquidity and inflows from the loan book are adequate to meet the repayment obligations for the next one year. The monthly collection efficiency from the portfolio provides additional comfort. Furthermore, APAC had ~ 21 banking relationships as on March 31, 2024 compared to ~15 as on March 31, 2023 and 6 as on March 31,2022. Furthermore, the company received enhancements (in limits and tenor) from existing lenders. |
| Outlook: Stable |
| Acuité believes that APAC Financial services Pvt. Ltd.'s credit profile will have a 'Stable' outlook in the near to medium term, as it draws support from its experienced management and will be able to continue the growth momentum. The outlook could be revised to 'Positive' if the company is able to sustain the growth in AUM while improving the capital structure and maintaining asset quality and profitability metrics at healthy levels. The outlook may be revised to ‘Negative’ in case of significant deterioration in asset quality/ profitability metrics. |
| 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): |
| 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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