|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.00 | ACUITE A- | CE | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 25.00 | PP-MLD | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding | 32.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed long-term rating to ‘ACUITE PP-MLD BBB’ (read as Principal Protected Market Linked Debentures ACUITE triple B) on the Rs. 25.00 Cr. Principal Protected Market Linked Debentures facilities of Amrit Malwa Capital Limited (AMCL). The outlook is ‘Stable’.
Acuité has reaffirmed the long-term rating to ‘ACUITE A- (CE)’ (read as ACUITE A minus (Credit Enhancement) on the Rs. 7.00 Cr. partially credit enhanced term loan facilities of Amrit Malwa Capital Limited (AMCL). The outlook is ‘Stable’. Rationale for the rating The rating reaffirmed reflects the healthy growth in AUM and disbursements and improving earning profile of the company. The AUM increased to Rs. 554.96 Cr. as on March 31,2024 from Rs. 455.84 Cr. as on March 31,2023 aided by improving disbursement momentum. The AUM stood at Rs 551.38 Cr as on Q1FY25. The company has added 15 branches since FY23. The rating also factors in the experienced management team with diversified experience as well as adequate liquidity. The rating however, is constrained by moderate scale of operations and capitalization levels. AMCL’s capitalisation levels stood at 23.84 percent as on Q1FY25 aided by regular capital infusions from promoters. Going forward, AMCL’s ability to improve earnings profile, strengthen its capitalization levels while growing portfolio would be key monitorable. |
| About the Company |
|
Amrit Malwa Capital Limited is a non-deposit taking NBFC based out of Jalandhar, Punjab. The company focuses on financing two wheelers and E-rickshaws and operate in rural and semiurban Punjab and six other northern states and one UT namely Rajasthan, Chandigarh, Himachal Pradesh ,Haryana ,Uttar Pradesh, Uttarakhand and Madhya Pradesh through a network of 61 branches, as on June 30,2024. Amrit Group was a group of three NBFCs, promoted by Col. Joginder Singh Gill in 1987 post his retirement from the army. Within a span of three year his son Mr. Ajit Pal Singh Gill, current MD, joined the business. The promoters incorporated two NBFCs initially with an objective to attract more deposits from clients. Having two NBFCs was considered to be more tax efficient by the depositors also. With no such incentives available now once the deposit taking facility was discontinued in 2016, the two entities Amrit Hire Purchase and Malwa Ludhiana Motor Finance decide to merge themselves into one big entity forming Amrit Malwa Capital Limited. The Two entities got its merger approval in May’18. The other entity in the group is Amrit CIC which acts as a holding company. AMCL’s AUM as on Q1FY25 stood at Rs. 551.38 Cr. (Rs. 554.96 Cr. as March 31, 2024). The AUM comprised of owned portfolio of Rs. 455.79 Cr. as on Q1FY25.
|
| About the Guarantor |
|
Northern Arc, previously known as IFMR Capital Finance Ltd., is a non-deposit taking Nonbanking Financial Company (ND-NBFC) incorporated in 1989. It is involved in the placement (arranging funding for its clients via loan syndication, securitisation and assignment among others) and lending business. The company acts as a link between mainstream capital markets investors and high-quality last mile lending institutions and businesses. The company’s business is categorized as finance sector exposure, i.e., microfinance, affordable housing finance, commercial vehicle finance, consumer finance, Agri-finance and small business loans, and non-finance sector exposure, i.e., mid-market finance and corporates.
|
| Unsupported Rating |
| Acuite BBB/Stable |
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profile of AMCL for the Rs. 25.00 Cr. NCD facilities, the rating of AMCL (ACUITE BBB/Stable), and has further factored in the credit enhancement arising from the structure for the Rs. 7.00 Cr. Bank Loan Facilities. The suffix (CE) indicates credit enhancement arising from the PCE in the form of unconditional, irrevocable, payable on demand guarantee covering 15% of the initial principal value of the facility amount. The strength of the underlying structure and continued adherence to the same is central to the rating. Accounting for the Partial Credit Enhancement, the agency has enhanced the rating of the facility to ACUITE A- (CE)/ Stable. The Credit Enhancement (CE) in the rating is solely for the rated issue and its terms and structure.
The notched up rating of the loan facility incorporates the PCE in the form of guarantee by Northern Arc Capital Limited (“Northern Arc”), acting as the Credit Enhancer/ Guarantor. |
| Key Rating Drivers |
| Strength |
| Strength of underlying structure
The Credit Enhancer shall provide PCE, favouring AMCL in the form of an unconditional, irrevocable guarantee that covers 15% to the extent of Guarantee Cap guaranteeing the repayment of principal and payment of interest amounts in relation to the facility. If due to the amortisation of the facility, the credit enhancement % becomes greater than 25% of the aggregate outstanding principal of the facility, the Guarantee Cap shall be reduced to 25% of the aggregate outstanding principal of the facility (Revised Guarantee Cap). Borrower shall make payments of interest and principal amounts due and payable under the Facility Agreement into the Collection and Payment Account, opened and maintained by the Collection and Payment Agent by 4 PM IST, 5 (five) Business Days prior to due date (i.e., T5 Business Days). In case of non-payment by Borrower as stipulated above, Collection and Payment Agent shall on the same day, i.e., on the T-5 Business Day invoke the guarantees extended by the Guarantors and require the Guarantors to pay such amounts by 4 PM IST, 4 (four) Business Days prior to due date (i.e., T-4 Business Days) and Guarantors shall be jointly and severally liable to make such payment within the said timeline. In case of non-payment by the Borrower and the Guarantors as stipulated above, the Collection and Payment Agent shall on T-3 Business Days invoke the PCE and send a notice of 2 (Two) Business Day to the Credit Enhancer to make payments. Credit Enhancer shall make payment on T-1 Business Day (i.e. one day prior to the interest or principal due date) into the Collection and Payment Account. The facility has security in the form of exclusive first charge on identified book debts and receivables with 110% margin in favour of the lender. The security cover will be met from the date of disbursal of the facility. In case of AMCL senior secured long-term rating (as per Acuité view) downgrade to below BBB- the Borrower shall transfer the collections from the Hypothecated Property to the Collection and Payment Account on a weekly basis and such collections would be applied by the Collection and Payment Agent towards repayment of principal and interest due and payable in relation to the Facility and then towards accelerated payment of principal on the Facility. Improvement in Scale of operation and earning profile. AMCL has increased its branch size in FY24 (added 15 branches since FY23). The AUM stood at Rs 554.96 Cr. as on March 31,2024 against the AUM of Rs 455.84 Cr. in FY23. The AUM as on H1FY25 stood at Rs 577.78 Cr. The company’s major products include E-rickshaw financing and 2W financing which comprise 95 percent of the AUM as on March 31,2024. The company has added 1 new state in FY24 namely Madhya Pradesh which collectively hold ~0.12 percent of the AUM as on Q1FY25. The profitability metrics a saw an improvement as marked by increase in Total Income (net of interest expense) from Rs. 43.92 Cr. in FY23 to Rs. 60.85 Cr. in FY24 AMCL reported a PAT of Rs 9.28 Cr. in March 31,2024 as compared to a PAT of Rs 8.05 Cr. in March 31,2023. |
| Weakness |
| Moderate Asset Quality
The GNPA and NNPA moderated to 3.97 percent and 2.88 percent as on March 31, 2024 as against 2.97 percent and 2.01 percent as on March 31, 2023 respectively. Moreover, ~98% of the portfolio has ticket size less than ~Rs.0.02 Cr. providing high granularity to the book. Acuité believes, going forward, the ability of the company to maintain the asset quality while increasing the portfolio will be a key rating monitorable. Moderate capitalisation level The capital adequacy ratio of AMCL stood moderate at 22.57 percent as on March 31, 2024 (22.56 percent as on March 31, 2023; 22.99 percent as on March 31, 2022). The company has raised funds through regular promoter contributions which has helped maintain the CRAR and gearing levels. The gearing improved to 4.47 times as on March 31, 2024 as against 4.74 times as on March 31, 2023. Geographical concentration risks AMCL started its expansion recently which makes its portfolio highly concentrated in the areas of its initial operation. AMCL’s portfolio is highly concentrated in Punjab with ~57% of the portfolio originating from there followed by ~25 percent from Rajasthan. It makes AMCL vulnerable to policy changes and/or any other changes in the region affecting the business. In FY24, the company added 1 new state namely Madhya Pradesh. Acuité believes that improving the capitalization levels and expanding the business while maintaining the growth in earning profile will be crucial. |
| Assessment of Adequacy of Credit Enhancement (Applicable only for CE Ratings) |
|
AMCL has significant experience in the Two-wheeler financing segment and has healthy asset quality. Thus, Acuité believes that the CE will stand adequate in all scenarios and in the event of any requirement, Northern Arc will provide the necessary support.
|
| Rating Sensitivity |
|
| All Covenants (Applicable only for CE & SO Ratings) |
|
Financial Covenants:
1. Minimum capital ratio of Tier I Capital and Tier II Capital to aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items shall not be less than 15.00 percent or as per the regulatory minimum prescribed by the Reserve Bank of India under the NBFC Master Directions, whichever is higher. 2. Maximum permissible ratio of sum of the Par > 90 and write-offs (on the Borrower's entire portfolio including receivables sold or discounted on a non-recourse basis) to trailing twelve months disbursements shall be 6.00 percent, write-offs and loss on sale of repossessed assets would be calculated for trailing twelve months. 3. Maximum permissible ratio of Par > 90 net off loan loss provisions to Tangible Net worth shall be 20.00 percent. |
| Liquidity Position |
| Adequate |
| AMCL’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated March 31,2024. The company has cash and bank balances to the tune of Rs.44.63 Cr. as of March 31,2024 and is in talks with new and existing lenders to further aid its disbursements and liquidity. |
| Outlook: Stable |
| |
| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
| Status of non-cooperation with previous CRA (if applicable): |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• 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 • Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm |
| Note on complexity levels of the rated instrument |
|
| |
|
|
|||||||||||||||||||||||||||
|
|
Contacts |
About Acuité Ratings & Research |
