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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 14.44 | ACUITE BBB- | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 33.52 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 2.04 | Not Applicable | Withdrawn | - |
| Total Outstanding | 33.52 | - | - |
| Total Withdrawn | 16.48 | - | - |
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Rating Rationale |
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Acuité has Reaffirmed the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) to the Rs. 33.52 Cr. bank loan facilities of AARSH FINCON LIMITED (ERSTWHILE AKME FINCON LIMITED) (AFL). The outlook is Stable
Acuité has Withdrawn the rating on the Rs. 2.04 Cr. bank loan facilities of AARSH FINCON LIMITED (ERSTWHILE AKME FINCON LIMITED). The rating has been withdrawn as applicable for the respected instrument/facility as per Acuité's policy of withdrawal of ratings after receiving the client's withdrawal request and the NDC received from the banker. Acuité has Reaffirmed and withdrawn the long term rating of ‘ACUITE BBB-' (read as ACUITE triple B minus) to the Rs. 14.44 Cr. bank loan facilities of AARSH FINCON LIMITED (ERSTWHILE AKME FINCON LIMITED). The rating has been withdrawn as applicable for the respected instrument/facility as per Acuité's policy of withdrawal of ratings after receiving the client's withdrawal request. Rationale for the Rating The rating reaffirmation is primarily driven by experienced management, established presence in its areas of operation and adequate capitalization level. The rating takes into account the ability of the company to raise funds through equity infusion at regular intervals (Rs 2.52 Cr. during FY2023; Rs 1.20 Cr. during FY2022) and expectations of further equity infusion in near to medium term. As a result of the equity infusion during FY2023 by the existing promoters, the company’s capitalization stood at 45.80 percent as on March 31, 2023 The rating also takes into account rebound in collection efficiency levels with average collection efficiency for 6 months ended December 31, 2023 stood at ~93.13 percent.
The rating is, however, constrained by modest scale of operations coupled with modest financial performance and geographic concentration . The company reported an AUM Rs 71.70 Cr as on March 31,2023 (Rs 65.42 Cr as on March 31,2022). The company’s PAT moderated to Rs 2.94 Cr as on March 31,2023 from Rs 3.56 Cr as on March 31,2022 owing to muted growth in interest income. The company’s on time portfolio stood at 89.70 percent [March 31, 2022: 89.79 percent] with a GNPA of 2.28 percent as of March 31, 2023. AFL’s portfolio is exposed to high geographical concentration risk, as 81.40 percent of the total portfolio is concentrated in only state of Rajasthan as of September 30,2023. |
| About the company |
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Udaipur based; AARSH Fincon Limited( ERSTWHILE AKME FINCON LIMITED) was incorporated in 1996 as a non-deposit taking non-banking finance company (NBFC). The company is engaged in financing of two wheelers, three/four wheelers, commercial vehicles and loan against property (LAP) towards SME borrower base. AFL is promoted and managed by Mr. Anil Kumar Jain. The company presently operates through a network of 58 branches spread across Rajasthan, Madhya Pradesh, Maharashtra Orissa and Gujarat.
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| Unsupported Rating |
| None |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of AARSH FINCON LIMITED to arrive at the rating. |
| Key Rating Drivers |
| Strength |
| Experienced Management:-
AARSH FINCON LIMITED (AFL), a Non-Deposit accepting Non-Banking Financial Company, commenced its operations in 1996. The operations of the company are manged by Mr. Anil Kumar Jain (Managing Director). He has over two decade of experience in non-banking and financial services. Mrs Shilpa Jain (Executive Director) and Mrs Vimal Jain (Executive Director) actively manage and improvise the day to day operations of the company. Mr Praveen Kumar (Additional Director) is responsible for corporate administration & relationship management. Further, AFL has long track record of operations in the vehicle financing segment. The company’s AUM stood at Rs 71.70 Cr as on March 31, 2023 and Rs 65.42 Cr as on March 31,2022. The company’s disbursements stood at Rs.36.68 Cr. in FY2023 as against Rs.28.82 Cr. in FY2022. AFL’s portfolio comprises of vehicle financing ~68.92percent and LAP of 31.08 percent as on September 30, 2023.
Acuité believes that AFL will continue to benefit from its established presence in the financial services industry along with the experienced promoters. Healthy Capitalization levels: The company’s AUM stood at Rs Rs 71.70 Cr as on March 31, 2023 and Rs 65.42 Cr as on March 31,2022. The networth stood at Rs 40.38 Cr as on March 31,2023 as against Rs 34.91 Cr as on March 31,2022. AFL’s Capital Adequacy Ratio (CAR) stood at 45.80 percent as on March 31, 2023, which marginally deteriorated from 48.14 percent as on March 31, 2022 owing to increase in risk weighted assets. The Promoters infused Rs 1.20 Cr during FY2022 and Rs 2.52 Cr during FY2023. Acuite believes that AFL will benefit from continued support of Management going forward. |
| Weakness |
| Moderate asset quality and financial performance
AFL’s asset quality has been moderate marked by on-time portfolio of 89.70 percent as on March 31, 2023 from 89.90 percent as on March 31, 2022. GNPA and NNPA levels stood at 2.28 percent and 1.94 percent as on March 31, 2023 as against 2.39 percent and 2.03 percent as on March 31, 2022. AFL registered operating income of Rs. 8.80 Cr. in FY2023 as against Rs.8.93 Cr. in FY2022. NIM and ROAA stood at 12.28 per cent and 3.51 per cent for FY2023 as compared to 13.40 per cent and 4.87 per cent for FY2022, respectively. Company's PAT has reduced marginally to Rs 2.94 Cr as on March 31,2023 compared to Rs 3.56 Cr as on March 31, 2022. Acuite believes that going forward ability of the company to grow its loan portfolio while improving its profitability will be key monitorable. Modest scale of operations coupled with geographic concentration risk The company has modest scale of operations with an outstanding loan portfolio of Rs. 71.70 Cr as on March 31, 2023, as compared to Rs 65.42 Cr. as on Septemeber 30, 2023. AFL’s portfolio is exposed to high geographical concentration risk, as 81.40 per cent of the total portfolio is concentrated in only state of Rajasthan. However, AFL has expanded to Gujarat, Maharashtra, Madhya Pradesh, and Orissa to minimize the geographic concentration risk. The company has plans for branch expansion in New Delhi . Generally, the risk profile of NBFCs with a geographically diversified portfolio is more resilient compared to that of entity with a geographically concentrated portfolio. Acuité believes that modest scale of operations coupled with geographic concentration in its portfolio will continue to weigh on the company’s credit profile over the near to medium term. |
| Rating Sensitivity |
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Movement in collection efficiency and asset quality
Movement in liquidity buffers Movement in profitability parameters Changes in regulatory environment |
| Liquidity Position |
| Adequate |
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AFL’s ALM statement as on Septemeber 30, 2023 shows positive cumulative mismatch in all the buckets and its liquidity position is adequate marked by monthly collections efficiency of approximately 94.44%. AFL has Rs.13.09 Cr of repayment towrads borrowings within one year and Rs 30.88 Cr of principal collections come due within one year, which seems to be a managed liquidity situation . Acuité believes that the ability of the company to raise long term funding and improve collections will be critical to maintaining liquidity profile at adequate levels.
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| Outlook: Stable |
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Acuité believes that AFL will benefit from its experienced promoters in the near to medium term. The outlook may be revised to 'Positive' in case of higher than expected growth in loan book, equity infusion, improvement in key operating metrics and liquidity. The outlook may be revised to 'Negative' in case of any headwinds faced in scaling up of operations or in case of any challenges in maintaining its asset quality and profitability metrics or any deterioration in liquidity position.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Total Income net off interest expense
Ratios as per Acuité calculations |
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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 • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.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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