|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 65.57 | ACUITE BBB | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 105.36 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 9.07 | Not Applicable | Withdrawn | - |
| Total Outstanding | 105.36 | - | - |
| Total Withdrawn | 74.64 | - | - |
|
Rating Rationale |
|
Acuité has Reaffirmed the long term rating of ‘ACUITE BBB’ (read as ACUITE triple B) to the Rs. 105.36 Cr. bank loan facilities of Arth Micro Finance Private Limited (AMPL). The outlook is Stable
Acuité has Withdrawn the long term rating of ‘ACUITE BBB' (read as ACUITE triple B) to the Rs. 9.07 Cr. bank loan facilities of Arth Micro Finance Private Limited (AMPL). The rating has been withdrawn as applicable for the respected instrument/facility as per Acuité's policy of withdrawal of ratings after receiving the client's withdrawal request and the NDC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 Acuité has Reaffirmed and withdrawn the long term rating of ‘ACUITE BBB' (read as ACUITE triple B) to the Rs. 65.57 Cr. bank loan facilities of Arth Micro Finance Private Limited (AMPL). The rating has been withdrawn as applicable for the respected instrument/facility as per Acuité's policy of withdrawal of ratings after receiving the client's withdrawal request.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 continues to derive strength from AMPL’s experienced management and operational track record. The rating takes into account the ability of the company to raise funds through equity infusion at regular intervals (Rs 1.50 Cr. during H1FY2024; Rs 1.85 Cr. during FY2023; 4.33 Cr. during FY2021) 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 improved to 35.16 percent as on March 31, 2023 as against 35.09 percent as on March 31, 2022. The rating further takes into account the improvement in the asset quality where the GNPA and NNPA for the owned book stood at 0.70 percent and NIL respectively in FY2023 as against GNPA of 1.92 percent and NNPA of 0.13 percent in FY2022. The rating however, is constrained by AMPL’s limited scale of operations and geographically concentrated portfolio. The company has seen muted growth in its AUM where the AUM grew from 370.18 Cr. in FY2022 to Rs 373.97 Cr. in FY2023 (Rs 309.42 in FY2021). Going forward, the company’s ability to raise capital (both debt and equity) and increase their scale of operations while maintaining collection efficiency & liquidity buffers, contain delinquencies across different time buckets and its resultant impact on profitability metrics would remain key monitorable. |
| About the company |
|
Jaipur based Arth Micro Finance Private Limited (AMPL) is a NBFC – MFI engaged in extending micro credit to women through Joint Liability Group (JLG) and Self Help Group (SHG) model. AMPL is promoted by Mr. Pramod Kumar Paliwal and Mr. Kuldeep Kumar Arora with an objective to develop socio economic conditions of the rural women borrowers. The company commenced its operations in 2007 in Jaipur, Rajasthan and has expanded its operations to Madhya Pradesh, Punjab and Haryana. AMPL currently operates in 43 districts with a branch network of 84 branches as on September 30, 2023.
|
| Analytical Approach |
|
Acuité has considered standalone business and financial risk profile of AMPL to arrive at the rating
|
| Key Rating Drivers |
| Strength |
| Experienced management and track record of operations
AMPL has been extending micro credit since 2007 to women engaged in income generating activities under Joint Liability Group (JLG) and Self Help Group (SHG) model. The company has geographical presence in the states of Rajasthan, Madhya Pradesh and 4 other states with its network of 84 branches and an Asset under Management (AUM) of Rs. 372.62 Cr. as on Sept 30, 2023. AMPL lends mostly to JLG groups, especially women in rural and semi-urban areas for income generating activities. AMPL also organizes women into groups of 8-20 members configuring a SHG, under agreement with IDBI Bank to undertake business correspondent activities. AMPL is promoted by Mr. Pramod Kumar Paliwal and Mr. Kuldeep Kumar Arora. Mr. Pramod Kumar Paliwal is the Chairman at Society for Indian Institute of Rural Development and has been actively involved in promotion of livelihood activities in the rural sector of around three decades. Mr. Pramod Kumar Paliwal was also a National Expert on cluster development with United Nations Industrial Development Organization (UNIDO) consultant with World Bank. Mr. Kuldeep Kumar Arora also has around two decades of experience in microfinancing and livelihood development activities and he is a member of committee on SHG promotion constituted by NABARD. The board is supported Mr. Ashok Bhargava (Independent Director) who has around three decades of experience with SIDBI and was involved in SME development banking and Mr Dinesh Narain Awasthi (Independent Director), Vice Chancellor at Lok Jagrut Kendra University and Advisor at Society for Research and Initiatives for Sustainable Technologies and Initiatives (SRISTI). Acuité believes that presence of the experienced promoters in the microfinance segment will be central to support the business risk profile of the company. Improvement in Asset Quality metrics The company’s loan portfolio outstanding as on March 31, 2023, grew to Rs. 373.97 Cr as compared to Rs. 370.18 Cr Cr as on March 31, 2022. Further, the AUM stood at ~Rs 400 Cr as on December 31, 2023. AMPL offers tailor made micro credit products to women through Joint Liability/ Self Help Group within the range of Rs. 20,000 to 60,000, primarily for income generating purpose. The loans have a tenure of 14 to 26 months. The company has partnered with banks and NBFCs as its business correspondence partner. AMPL has FLDG arrangements with these partners which provide risk cover on the managed book portfolio. AMPL has demonstrated sound asset quality, as reflected in the low Gross Non-Performing Assets (GNPA) for owned book at 0.70 percent as on March 31, 2023 improving from 1.92 percent as on March 31, 2022. The company reported nil Net Non-Performing Assets (NNPA) as on Mar 31, 2023. The company’s overall collection efficiency(including pre-payments) averages at 98.89 percent for last 6 month ended September 2023, resulting to an on-time portfolio of 97.7 percent as on September 30, 2023 improving from 95.74 percent as on March 31, 2022. Acuite believes that the ability of the company to grow its loan portfolio while maintaining asset quality will be key monitorable. |
| Weakness |
| Geographically concentrated portfolio and Risk Inherent to Microfinance segment
The activities of microfinance companies, like AMPL are exposed to geographical concentration risks. AMPL has presence in four states with concentration in Rajasthan (~61 percent of the overall portfolio) and Madhya Pradesh (~17 percent of the overall portfolio) as on Sep 30, 2023. It has 84 branches located over 43 districts. This exposes the company to high geographical concentration risk. Thus, the company's performance is expected to remain exposed to competitive landscape in these regions and occurrence of events such as natural calamities, which may 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 AMPL. Acuité believes that geographic concentration in its portfolio coupled with the inherent risk in microfinance segment will continue to weigh on the company’s credit profile over the near to medium term. Modest Scale of Operations AMPL is primarily focused on microfinancing through JLG model and SHG under business correspondence agreement. The company reported AUM at Rs. 372.62 Cr. as on September 30, 2023. The AUM comprised of owned portfolio of Rs. 127.31 Cr. and off-book exposure of Rs. 245.31 Cr as on Sept 30, 2023. Over the past three years, the off book portfolio has contributed significantly towards the total AUM, contributing ~66 percent of the AUM as on September 30, 2023. AMPL takes off-book exposure through Business Correspondence model. The company is engaged in Business Correspondence relationship with Yes Bank (since 2014), IDBI Bank (since 2016), MAS Financial Services Limited, Utkarsh Small Finance Bank and Kissandhan Agri Financial Services Private Limited. Acuité expects AMPL to grow its loan portfolio in a sustainable manner through both on book and off book exposure. |
| Rating Sensitivity |
|
| Liquidity Position |
| Adequate |
|
AMPL’s overall liquidity profile remains adequate with no negative cumulative mis-matches in near to medium term as per ALM dated Sept 30, 2023. The company raised fresh debt of Rs. 72.50 Cr in FY2023 in the form of term loans. Further AMPL has raised Rs. 37 Cr as on September 2023. The company is in talks with various lenders to raise long term debt. The company has a cash and cash equivalent of Rs 30.84 Cr as on March 31, 2023.
|
| Outlook: Stable |
|
Acuité believes that AMFL will maintain a 'Stable' outlook over the medium term supported by its established presence in the microfinance segment along with demonstrated ability to maintain healthy AUM (on balance sheet assets and assets under BC model) and profitability metrics. The outlook may be revised to 'Positive' in case of higher than expected growth in AUM while maintaining key operating metrics and asset quality 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, profitability metrics and capital structure.
|
| 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 • 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
|
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
|
|
|
About Acuité Ratings & Research |
