Press Release December 16, 2024 Anik Financial Services Private Limited Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	10.00	ACUITE BB | Stable | Reaffirmed	-
Total Outstanding	10.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­Acuité has reaffirmed the long-term rating of ‘ACUITE BB’ (read as ACUITE double B) on the Rs. 10.00 Cr. bank facilities of Anik Financial Services Private Limited (AFPL). The outlook is 'Stable'.  Rationale for Rating The rating reaffirmation takes into account AFPL’s established presence in its area of operations, experienced management and the company’s ability to maintain healthy asset quality which is expected to augur well for the company over the near to medium term. The rating factors in AFPL’s comfortable capitalisation levels and asset quality metrics. AFPL’s CAR stood at 17.86 percent as on March 31, 2024. The company’s on time portfolio stood at 97.36 percent with a GNPA of 1.27 percent as on Mar 31, 2024. Likewise, average collection efficiency for six months ended June 31, 2024 stood at 97.13 percent. The rating is however, constrained by modest scale of operations, limited financial flexibility and capital raising ability, geographic concentration and risks inherent to micro finance sector. Going forward, the company’s ability to bolster its capitalization levels and profitably expand its scale of operations shall be key monitorables.

About the Company

Incorporated in the year 1991, ­Maharashtra based Anik Financial Services Private Limited (AFPL) is a NBFC-MFI engaged in microfinance lending by way of extending credit through Self-Help Group (SHG) and Joint Liability Group (JLG). AFPL is promoted by Savitribai Phule Mutual Benefit Trust (SPMBT). SPMBT is a federation of SHG’s in their respective districts registered as Mutual Benefit Trust. AFPL commenced its microfinance as a Mutual Benefit Trust in 2002 and later the promoters acquired an existing NBFC and transferred the operations to AFPL in 2009. AFPL currently operates in Maharashtra and Telangana with its network of 8 branches spread across 4 districts as on Sept 30, 2024.

Unsupported Rating

­Not Applicable

Analytical Approach

­Acuité has considered the standalone business and financial risk profile of AFPL to arrive at the rating.

Key Rating Drivers

Strength

­Established management in micro-finance segment AFPL is engaged in extending microfinance to women involved in income generating activities under SelfHelp Group (SHG) model. The company has also adopted the Joint Liability Group (JLG) model from 2019 along with SHG. Lending through JLG model now comprise around 60 percent of the portfolio outstanding as on March 31, 2024. AFPL operates in total 4 districts of Maharashtra and Telangana with its network of 8 branches. The company’s loan portfolio stood at Rs. 39.25 Cr. as on March 31, 2024 as compared to Rs. 33.23 Cr. as on March 31, 2023 and Rs. 23.94 Cr. as on March 31, 2022. AFPL’s promoters have over two decades of experience in micro finance lending. The promoters started their micro lending operations in the form of trusts named Savitribai Phule Mutual Benefit Trust since 2002 and later in 2009 started operating through AFPL as a NBFC-MFI. The board is led by Mr. Ramesh Bhise (Chairman) and Mr. Jayaji Paikrao (Founder & Vice Chairman) and supported by 6 other directors. The company has on board Mr. Vikramjit Mehmi (Director) who has over 3 decades of experience in corporate sector and has previously been the CEO at Idea Cellular, Birla Sun Life Insurance & Suzlon Green Power (India). AFPL also benefits from Mr. Hemant Valvekar’s (Director) vast experience in the microfinance segment with his stint of over a decade at BASIX and also having worked for RBL Bank as a senior advisor in developing their Financial Inclusion and Business Correspondence vertical. Mr. Hemant Valvekar has been associated with AFPL since the very beginning and was instrumental in transitioning the business from trusts to NBFC-MFI. The prudent underwriting policies adopted by the management has enabled the company to maintain a sound asset quality with an on-time portfolio at 97.36 percent as on March 31, 2024 and gross non-performing assets (GNPA) at 1.27 percent. The sound asset quality was further reflected with an average collection efficiency of 97 percent for 6 months ended June 30, 2024. Acuité believes that established presence of the promoters in the microfinance segment will be central to support the business risk profile of the company in the near to medium term.

Weakness

­Modest scale of operations; scalability of business yet to be demonstrated AFPL has been in the micro-finance lending segment since 2009. The company registered a growth in its loan portfolio of Rs. 39.25 Cr. as on March 31, 2024 (Rs. 33.23 Cr. as on March 31, 2023). AFPL’s financial performance has been broadly stable. The company’s profitability margin remained moderate as reflected in its Return on Average Assets (RoAA) of 0.39 percent as on March 31, 2024 as compared to 0.39 percent as on March 31, 2023 mainly on account of higher Operating Expenses to Earning Assets ratio which stood at 10.27 percent as on March 31, 2024 (8.65 percent as on March 2023). While the company has scaled up its loan portfolio steadily over the years, the profitability of AFPL has remained moderate as indicated by RoAA. Going forward, the company’s ability to attract equity and debt capital will be a key factor in the scalability of the business. Acuité believes, going forward, the ability of the company to mobilize additional funding through debt /equity and its ability to deploy the funds profitably while maintaining its asset quality will be key rating sensitivity. Susceptibility to risks inherent to microfinance segment AFPL’s has presence in two states i.e. Maharashtra and Telangana with a network of 8 branches across 4 districts together in both states with ~97 percent of entire portfolio concentrated in the states of Maharashtra exposing it to geographical concentration risks. 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 AFPL. Acuité believes that profitable expansion in scale of operations will be key rating sensitivity.

Rating Sensitivity

­ ­Ability to raise capital Movement in profitability metrics Movement in collection efficiency and asset quality  Movement in liquidity buffers Changes in regulatory environment

Liquidity Position

Adequate

­AFPL maintained cash and cash equivalents of Rs. 1.20 Cr. as on March 31, 2024. AFPL’s overall liquidity profile remains adequate. The company’s assets and liabilities are well matched with no deficit in any of the time buckets upto 5 years.

Outlook:

­Stable.

Other Factors affecting Rating

­None.

Key Financials - Standalone / Originator

­ Particulars Unit FY24 (Actual) FY23(Actual) Total Assets Rs. Cr. 43.66 37.46 Total Income* Rs. Cr. 4.86 3.37 PAT Rs. Cr. 0.16 0.13 Net Worth Rs. Cr. 12.30 12.15 Return on Average Assets (RoAA) (%) 0.39 0.39 Return on Average Net Worth (RoNW) (%) 1.29 1.05 Debt/Equity Times 2.36 1.87 Gross NPA (%) 1.27 0.31 Net NPA (%) 0.13 0.03 *Total income equals to Net Interest Income plus other income

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 • 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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 18 Sep 2023 Proposed Long Term Bank Facility Long Term 5.00 ACUITE BB | Stable (Reaffirmed) Proposed Long Term Bank Facility Long Term 5.00 ACUITE BB | Stable (Assigned) 01 Dec 2022 Proposed Long Term Bank Facility Long Term 5.00 ACUITE BB (Reaffirmed & Issuer not co-operating*) 08 Sep 2021 Proposed Long Term Bank Facility Long Term 5.00 ACUITE BB | Stable (Upgraded from ACUITE BB- | Stable)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE BB | Stable | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE BB | Stable | Reaffirmed

Contacts

Mohit Jain Senior Vice President - Rating Operations Tejas Chaugule Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

­Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.