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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 75.00 | ACUITE AA | Stable | Assigned | - |
| Non Convertible Debentures (NCD) | 150.00 | ACUITE AA | Stable | Reaffirmed | - |
| Total Outstanding | 225.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed the long term rating of 'ACUITE AA' (Read as ACUITE double A) on the Rs 150.00 Cr. Non-convertible Debentures of Arka Fincap Limited. The Outlook is 'Stable'. Acuite has assigned the long term rating of 'ACUITE AA' (Read as ACUITE double A) on the Rs 75.00 Cr. Non-convertible Debentures of Arka Fincap Limited. The Outlook is 'Stable'. Rationale for Rating The rating is driven by the parentage of of Kirloskar Oil Engines Ltd (KOEL) which is one of the flagship companies of the Kirloskar Group. This brings financial flexibility to Arka Fincap Ltd. KOEL has already infused around Rs 1000 crores as on March 31,2024 and has the ability to infuse further to drive the growth for Arka Fincap Ltd. The rating also factors the steady scale up in operations of Arka Fincap Limited, as seen in the growth in the AUM. |
| About the company |
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Arka Fincap Limited Mumbai based, Arka Fincap Limited was incorporated in 2018. Mr. Mahesh Ramchand Chhabria, Mr. Vijay Chugh, Mr. Sivanandhan Dhanushkodi, Mr. Yogesh Kapur, Mr. Vimal Bhandari, Mrs. Gauri Atul Kirloskar, Mr. Gurumurthy Ramanathan are directors of the company. The company is engaged in lending activity. The company is registered with Reserve Bank of India as a Non banking financial Company. The company is a wholly owned subsidiary of Arka Financial Holdings Private Limited which in turn wholly owned by Kirloskar Oil Engine LImited. |
| About the Group |
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About the Group Companies: Arka Financial Holdings Private Limited Mumbai based, Arka Financial Holdings Private Limited was incorporated in 2021. It operates as an unregistered core investment company. The company is a wholly owned subsidiary of Kirloskar Oil Engines Limited. Arka Financial Holdings Private Limited is a holding company of Arka Fincap Limited. Mr. Mahesh Ramchand Chhabria, Mr. Vimal Bhandari, Mrs. Gauri Atul Kirloskar, Mr. Sivanandhan Dhanushkodi, Mr. Rahul Narain Bhagat, Mr. Yogesh Kapur are directors of the company. Kirloskar Oil Engines Limited Kirloskar Oil Engines Limited is an ultimate holding company of Arka Fincap Limited. Pune based, Kirloskar Oil Engines Limited was incorporated in 2009. It is engaged in the business of manufacturing of engines, generating sets, pump sets and power tillers and spares thereof. The Company operates through three segments: Business to Business (B2B), Business to Customer (B2C) and Financial Services.Mr. Vinesh Kumar Jairath, Mr. Satish Jamdar, Mr. Kandathil Mathew Abraham, Mrs. Shalini Sarin, Mrs. Purvi Sheth, Mr. Rahul Chandrakant Kirloskar, Mr. Mahesh Ramchand Chhabria, Mrs. Gauri Atul Kirloskar, Mr. Atul Chandrakant Kirloskar, Mr. Yogesh Kapur, Mr. Arvind Hari Goel are directors of the company. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| For arriving at the rating, Acuite has assessed the standalone credit risk profile of Arka, and factored in the support expected from ultimate parent, KOEL, given the strategic importance of Arka to the former, 100% ultimate shareholding. |
| Key Rating Drivers |
| Strength |
| Strong parent support from Kirloskar Oil Engine Limited (KOEL) KOEL is the ultimate holding company of Arka Fincap Limited through Arka Financial Holdings Ltd. This brings the financial flexibility to Arka Fincap Ltd and its promoters have already infused around Rs 1000 crore and it is expected that they can infuse further to drive the growth for Arka Fincap Ltd . The revenues of KOEL have increased to Rs. 5893.65 Cr. in FY24 as against Rs. 5016.68 Cr. in FY23. The EBIDTA margins is on an improving trend. EBIDTA margin for FY24 improved to 17.77% as against 14.65% in FY23. The AUM for Arka Fincap Limited has increased from Rs 3961.14 Cr. in FY23 to Rs 5210.41 Cr. in FY 24. Steady growth in AUM while maintaining asset quality The AUM for Arka Fincap Limited has increased from Rs 3961.14 Cr. in FY23 to Rs 5210.41 Cr. in FY 24 indicating steady growth in the loan portfolio. The Asset Quality of Arka Fincap Limited as indicated by the GNPA is at 0.23% and the NNPA is at 0.06% as on March 31, 2024. The on time portfolio of Arka Fincap Limited is seen at 98.79% and the overall collection efficiency is seen at 100% as on March 31, 2024. |
| Weakness |
| Limited track record Arka Fincap Limited has recently started operations in 2019 and the seasoning on the loan portfolio is yet to be seen. The asset under management (AUM is Rs 5210.41 Cr. in FY24). The SME/MSME lending comprises around 42.36% of the AUM, followed by RE and Urban Infra lending at 25.52%, corporate lending comprises 24.31% of the total AUM. Going forward it would be essential to monitor the operations of Arka Fincap Limited. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
| The company has an adequate liquidity position with the cash and cash equivalents of Rs 392.53 Cr. as on March 31, 2024. The liquidity profile also factors in the support from the parent company. |
| Outlook : Stable |
| Acuité believes Arka Fincap Limited will maintain a ‘Stable’ outlook given its support from the parent company,experienced management team and comfortable capitalization. The outlook may be revised to 'Positive' if there is significant scale up of the operations while improving profitability and asset quality. Conversely, the outlook may be revised to 'Negative' in case of growth challenges or if the company faces asset quality or liquidity related challenges. |
| 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 • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.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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