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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 25.00 | ACUITE BB+ | Stable | Assigned | - |
| Bank Loan Ratings | 50.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Total Outstanding | 75.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ ACUITE BB+’ (read as ACUITE double B plus) on the Rs. 50.00 crore bank facilities of Bharathi Women Development Centre (BWDC). The outlook is ‘Stable'. Acuité has assigned the long-term rating of ‘ ACUITE BB+’ (read as ACUITE double B plus) on the Rs. 25.00 crore bank facilities of Bharathi Women Development Centre (BWDC). The outlook is ‘Stable'. Rationale for Rating The rating continues to factor in the experienced management and moderate capitalisation levels. BWDCs capital adequacy ratio stood at 31.63 percent as on March 31, 2024 (Prov.) as against 26.05 percent as on March 31, 2023. The rating takes in to account healthy asset quality indicators marked by GNPA and NNPA of 0.07 percent and 0.03 percent respectively as on March 31, 2024(Prov.). BWDC has been able to maintain healthy asset quality metrics on account of its established business model. The collection efficiency till March 31, 2024 stood at 97.30 percent. These strengths are partially offset by modest scale of operations, geographic concentration and limited financial flexibility with further constrains AUM growth. Going forward, the company’s ability to profitably scale up its operations while maintaining its asset quality and profitability shall be key monitorables. |
| About the company |
| Tamil Nadu-based, BWDC was established in 1987, as a non-profit organization. It is registered under the Societies Registration Act, 1975. BWDC extends micro-credit to the poor and underprivileged women in the society, engaged in income-generating activities under the Joint Liability Group (JLG) and Self Help Group (SHG) model. The society caters to the rural areas of Tamil Nadu and Puducherry. The board of directors comprise of Ms. V S Kusala Kumari (President), Ms. Amirthavalli. R (Vice President) and Mr. M. Nagarajan (CEO). |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of BWDC to arrive at this rating. |
| Key Rating Drivers |
| Strength |
| Experienced management and established presence in area of operation. BWDC, commenced its lending operations in 2009, offering micro-credit to women engaged in income generating activities under the Joint Liability Group (JLG) model and Self Held Group (SHG) model. The society also extends Small Business Loan, Agriculture Loans and Water & Sanitation loans. BWDC caters to rural areas of Tamil Nadu and Puducherry with its network of 18 branches across 8 districts. BWDC is promoted by Mr. M. Nagarajan (CEO). The board members are Ms. VS Kusala Kumari (President), Ms. Amirthavalli. R (Vice President). BWDC’s managing committee includes seasoned professional like Ms. J. Selva Kumari (Joint Secretary) and Dr. K. Baskar (Treasurer), who have over three decades of experience working with various societies engaged in microfinance lending. Over the years, BWDC has expanded its operations to build an AUM of Rs. 59.08 Cr. as on March 31, 2024(Prov.) as compared to Rs. 50.15 Cr. as on FY2023. Acuité believes that experience of the promoters and management will be central to support the business risk profile of the society. Healthy Asset Quality; Adequate Profitability. BWDC has been able to maintain healthy asset quality metrics on account of its established business model. BWDC receives 99% the dues within time, which ensures the asset quality. AUM has also increased to Rs. 59.08 crore as on March 31, 2024(Prov.) from Rs. 50.15 crore in FY2023. The overall profitability has largely been stable, BWDC reported a marginal incline in the bottom-line to Rs. 1.43 Cr. in FY2024 as compared to Rs. 1.40 Cr. in FY2023. Acuité believes that going forward the ability of the company to maintain sound asset quality and adequate profitabilitywill be key rating sensitivity. |
| Weakness |
| Modest scale of operations and low geographic concentration. BWDC has a major presence in Tamil Nadu and remaining towards Puducherry. This exposes BWDC to high geographical concentration risk. Thus, business performance is expected to remain exposed to the competitive landscape in these regions and the occurrence of events such as natural calamities, which may adversely impact the credit profile of the borrowers. The microfinance sector is also susceptible to regulatory risks. Such institutions lend to the poor and downtrodden sections of society, and will therefore remain exposed to socially sensitive factors and, consequently, to tighter regulations and legislation. Acuité believes that modest scale of operations coupled with geographic concentration in its portfolio will continue to weigh on BWDC’s credit profile over the near to medium term. Limited Financial Flexibility. BWDC being a non-profit organization, has limited scope of raising equity capital which further constrains its ability to borrow and scale up business operations. BWDC relies on external borrowings which comprises of term loans from banks and NBFCs/FIs that amounts to Rs. 54.43 crore as on March 31, 2024. The gearing levels as on March 31, 2024 (Prov.) remained at 4.40 times as compared to 4.66 times as on March 31, 2023. Further, due to highly leveraged capital structure the society might face difficulty in attracting additional funding to support the growth in operations which may consequently impact its profitability and hinder growth plans. Acuité believes that going forward the company’s ability to maintain prudent capitalisation and gearing levels would be critical. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
| BWDC’s overall liquidity profile remains adequate in near to medium term. The society has maintained cash and cash equivalents of Rs. 0.38 Cr. as on March 31, 2024. The company has witnessed current collection efficiency of around 97.30 percent in March 31, 2024, which further supports its liquidity profile. |
| Outlook: Stable |
| Acuité believes that BWDC will maintain a 'Stable' outlook over the medium term supported by its established presence in the microfinance segment along with demonstrated ability to maintain asset quality. The outlook may be revised to 'Positive' in case of higher than expected growth in the loan portfolio while maintaining asset quality and capital structure. The outlook may be revised to 'Negative' in case of any headwinds faced in scaling up of operations or in case of significant deterioration in asset quality, thereby impacting profitability metrics. |
| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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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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