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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 150.00 | ACUITE BBB- | Stable | Upgraded | - |
| Non Convertible Debentures (NCD) | 10.00 | ACUITE BBB- | Stable | Upgraded | - |
| Non Convertible Debentures (NCD) | 10.00 | Provisional | ACUITE BBB- | Stable | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 170.00 | - | - |
| Rating Rationale |
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Acuité has upgraded its long term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.150.00 Cr. bank facilities of AKME Fintrade India Limited (AFIL). The outlook remains ‘Stable’.
Acuité has also upgraded the long term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.10.00 Cr. secured redeemable Non-convertible debentures of AFIL. The outlook remains ‘Stable’. Acuité has upgraded the long term rating to ‘ACUITE Provisional BBB-’ (read as ACUITE Provisional triple B minus) from ‘ACUITE Provisional BB+’ (read as ACUITE Provisional double B Plus) on the Rs.10.00 Cr. proposed secured redeemable Non-convertible debentures of AFIL.The outlook remains ‘Stable’ . The conversion of this rating to final is subject to:
Rating Rationale
The rating upgrade is primarily driven by capital infusion and improvement in collection efficiency along with the change in management and inclusion of experienced professionals in the Board of Directors. The promoters have in total infused ~Rs. 52 Cr in FY23, till December 2022, which has taken the networth to ~Rs. 197 Cr and together with repayments in debt, the gearing has come down to 0.89 times as on December, 2022. Further, the collection efficiency has improved to ~86% in December, 2022 from ~73% in March 2022. AFIL has broad based its management team by inducting experienced professionals. AFIL has appointed CEO,Mr. Bobby Singh Chandel, COO, Mr.Sunil Devdas, Legal Head, Mr. Satish Sawnani, Tech Advisor, Mr. Rajendra Sawant, CRO and CCH, Mr. Suresh Chandra Gupta and Collection Head,Mr. Naresh Goswami, hence completely revamping its top management with professionals having rich vintage in their domain in lending space.AFIL have inducted Mr Shiv Prakash Shrimali, ex-chairman of RMGB, in to their BoD. The induction of new management is expected to further augment the business risk profile AFIL over the medium term. The rating strengths however are partly offset by its moderate asset quality, reduction in AUM, low disbursements and geographical concentration of the portfolio. The moderate asset quality of AFIL is marked by GNPA of 4.87% as on September, 2022, which was 4.90% as on March 2022 and 3.57% for FY21.The AUM of AFIL stood at ~Rs. 361.11 Cr. as on December 2022 as against ~Rs.387.11 Cr. for FY22 and ~Rs.437.08 Cr for FY21. The disbursements for FY22 stood at ~Rs.19.54 Cr.as against Rs.53.78 Cr. in FY21. The disbursement till December, 2022 improved to ~Rs. 41.58 Cr.. The PAT levels also moderated for FY22 and stood at ~Rs. 4.33 Cr as against Rs. 16.70 Cr. in FY21. AFIL has made a PAT of ~Rs. 6.22 Cr. till H1FY23. Portfolio of AFIL is geographically concentrated as ~73% of their portfolio originating from Rajasthan.. Going forward, the company’s ability to raise funds and improve the AUM, disbursements and profitability while improving the asset quality would remain key monitorables. |
| About the company |
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Udaipur based, Akme Fintrade India Limited (AFIL) was incorporated in 1996 as a non-deposit taking non-banking finance company (NBFC). The company is engaged in financing of two wheelers, four wheelers, commercial vehicles and loan against property (LAP) towards SME borrower base. AFIL is promoted by Mr. Nirmal Kumar Jain. The company presently operates across Rajasthan, Madhya Pradesh, Maharashtra, Gujarat and Odisha as on September 30, 2022, with majority of their operations in Rajasthan
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of AFIL to arrive at the rating. |
Key Rating Drivers
| Strength |
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AFIL’s board comprises 10 members led by Mr. Nirmal Jain (Promoter Director). Mr. Nirmal Jain has over two decades of experience in financial services domain. Mr. Jain is a Chartered Accountant and actively manages day-to-day activities of the company. AFIL has recently inducted Mr. Shiv Prakash Shrimali, as an independent director on the board. Mr. Shrimali, ex-chairman of Rajasthan Marudhara Gramin Bank (RMGB), is a seasoned banker with more than 3 decades of experience across the business verticals in lending space. All other members in the board has an experience of close to a decade in different sectors of finance and lending space.
The top management of AFIL has seen a complete revamp as new management team comprising of CEO ,Bobby Singh Chandel, COO, Sunil Devdas, Legal Head, Satish Sawnani, Tech Advisor, Rajendra Sawant, CRO and CCH, Suresh Chandra Gupta and Collection Head ,Naresh Goswami, have joined the company.The team has rich vintage in their related domain in the lending space. Day to day operations are being managed by this team backed by defined policies, processes and guidelines to ensure asset build up backed by quality.
The promoters have infused ~Rs. 52.00 Cr. in FY23 till December, 2022. This round of capital infusion has taken the networth of the company to ~Rs. 197 Cr. as on December, 2022. further. the repayments in debt along with the capital infusion has taken the gearing levels to a healthy position of 0.89 times as on December, 2022.
In line with the capital infusion, AFIL reported a healthy capitalisation levels of 41.37% as on H1FY23. The CAR stood at 35.07% as on March 31, 2022 and 29.41% as on March 31, 2021. |
| Weakness |
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AFIL has moderate asset quality with GNPA at 4.87% as on H1FY23. The GNPA as on March 31, 2022 stood at 4.90% as compared to 3.57% as on March 31, 2021. The GNPAs have largely originated and have remained concentrated in the LAP portfolio of the company with (~94%). Eventhough there is improvement in the collection efficiency of the company to ~86% in December, 2022 from ~73% in March 2022, the reduction in AUM has kept the GNPAs stagnant. Eventhough the GNPAs have been stagnant, AFIL has only made a provision of ~Rs. 3.05 Cr as on H1FY23, which is in the lower side.
The AUM of AFIL stood at ~Rs.361 Cr as on Decemeber, 2022. The AUM for FY22 was ~Rs. 387.11 Cr. and ~Rs. 437.08 Cr. for FY21. The company reported PAT of ~Rs. 16.70 Cr. for FY21 which reduced to ~Rs.4.33 Cr. for FY22. The PAT for H1FY23 stood at ~Rs. 6.22 Cr. ROAA reduced to 1.05% for FY22 from 3.41% for FY21. ROAA further stood at 3.43 % for H1FY23.
AFIL has presence majorly in Rajasthan with ~73 percent of the AUM originating from there as on H1FY23. This exposes the company to high geographical concentration risk. The company's performance is expected to remain exposed to competitive landscape in these regions and occurrence of events such as natural calamities, are likely to adversely impact the credit profile of the borrowers. Besides geography, the company will be exposed to competition and any changes in the regulatory framework thereby impacting credit profile of AFIL. Going forward the company's ability to improve its asset quality while improving its financial metrics will be a key monitorable.
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| Rating Sensitivity |
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| Material Covenants |
| None |
| Liquidity Position |
| Adequate |
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The recent capital infusions and increase in the collection efficiency have kept the liquidity profile of AFIL adequate. There are no negative cumulative mismatches observed in any of the buckets of the ALM statement. The company has a net surplus in the range of Rs. 1-2 Cr every month and also have a short term deposit with banks of ~Rs. 4.30 Cr. as on September 30, 2022.
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| Outlook : Stable |
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Acuité believes that AFIL will benefit from its experienced promoters and top management in the near to medium term. The outlook may be revised to 'Positive' in case of higher than expected growth in loan book, 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 further deterioration in liquidity position.
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| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable): |
| None |
| Any other information |
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Supplementary disclosures for Provisional Ratings A. Risks associated with the provisional nature of the credit rating In case there are material changes in the terms of the transaction after the initial assignment of the provisional rating and post the completion of the issuance (corresponding to the part that has been issued) Acuite will withdraw the existing provisional rating and concurrently, assign a fresh final rating in the same press release, basis the revised terms of the transaction. B. Rating that would have been assigned in absence of the pending steps/ documentation The rating would be equated to the standalone rating of the entity: ACUITE BBB- C. Timeline for conversion to Final Rating for a debt instrument proposed to be issued The provisional rating shall be converted into a final rating within 90 days from the date of issuance of the proposed debt instrument. Under no circumstance shall the provisional rating continue upon the expiry of 180 days from the date of issuance of the proposed debt instrument. |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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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