Acuité has adopted a consolidated approach and considered the business and financial risk profile of Capital India Finance Limited (CIFL) and its subsidiaries as on March 31, 2022, Capital India Home Loans Limited (CIHL) and Capital India Assets Management Private Limited (CIAM) for arriving at the rating.
CIHL is a subsidiary of CIFL with 99.89 percent shareholding as on March 31, 2022 and extends credit towards the affordable home loan segment. CIAM is a 100 percent subsidiary of CIFL, there were no major operations in CIAM at present.
CIFL divested its entire shareholding in Capital India Wealth Management Private Limited, CIFL Holdings Private Limited and Kuants Wealth Private Limited (formerly CIFL Investment Adviser Private Limited), to Capital India Corp Private Limited (main Holding Co. for Capital India Finance Limited), consequent to which these companies ceased to be CIFL’s wholly owned subsidiary companies with effect from December 2, 2021. 
Acuité has not considered Rapipay in consolidated approach as this is stated as one time investment and the Capital India Group does not intend to make any further investment in Rapipay. Further, Rapipay has a separate operational and management team. 
 

­Experienced management team backed by resourceful investors
Capital India Group has strong backing from its investors and experienced management team. The Group is promoted by Noida based Narvar Family and is led by senior professionals such as Dr. Harsh Kumar Bhanwala (Executive Chairman), Mr. Keshav Porwal (MD - CIFL) and Mr. Vineet Kumar Saxena (MD – CIHL & CEO – CIFL). Dr. Harsh Kumar Bhanwala is ex-Chairman NABARD and has over three decades of experience in banking and financial services including financial inclusion, Microfinance, Co-op. Credit Institutions, Rural Infrastructure Project Development and other areas. Mr. Keshav Porwal has more than two decades of experience in Financial Services sector and brings considerable experience in successfully closing large and complex transactions involving PE investments and restructuring of medium size companies. Mr. Vineet Kumar Saxena is a seasoned Banking & Financial services professional with around two decades of experience in Commercial & Retail Lending CIFL’s Board comprises of 6 members of which four are independent Directors. Dr. Harsh Kumar Bhanwala (ex-Chairman NABARD) is the Executive Chairman at CIFL. The day to day operations are managed by seasoned professionals with expertise in corporate finance, mortgage lending SME/MSME lending and real estate lending each having over a decade of relevant experience. CIFL is backed by domestic long-term investors such as Capital India Corp Private Limited (holding 73 percent), Dharampal Satyapal Limited (holding 7.97 percent), RJ Corp Limited (holding 4.9 percent) among others.
The ability to attract funding from diverse investors has supported the company’s capitalisation levels. The company has a networth (consolidated CIFL & CIHL; excl. non-controlling interest) of Rs. 556.31 Cr. as on March 31, 2022 (Rs. 543.73 Cr as on March 31, 2021). The company’s capital adequacy ratio remains comfortable with capital adequacy of 43.27 percent for CIFL (standalone) and 78.39 percent for CIHL (standalone) as on September 30, 2022 (41.08 percent for CIFL (standalone) and 81.80 percent for CIHL (standalone) as on March 31, 2022). CIFL has low gearing levels at 1.31 times as on March 31, 2022 (0.53 times as on March 31, 2021) (consolidated CIFL & CIHL).
Acuité believes that CIFL’s consolidated business profile will be supported by expertise of seasoned professional managing the day to day operations and the support from the resourceful investors.


Diversified Business Profile
Capital India Finance Limited has diversified business profile, its NBFC segment extends credit towards SME/MSME segment in form of Loan against Property and also extends corporate/structured finance loans. Over, the past years the company has shifted its focus towards more granular SME portfolio and has been significantly reducing its exposure towards its legacy commercial real estate exposure wherein, no new disbursements are being made. Capital India Home Loans Limited (CIHL), incorporated in 2017, extends credit towards affordable home loan segment. CIHL’s loan portfolio (standalone) grew to Rs. 221.98 Cr. as on March 31, 2022 from Rs. 137.02 Cr. as on March 31, 2021. CIHL’s loan portfolio stood at Rs. 274.08 Cr. as on December 31, 2022. The strategy of the Group is to build a relatively smaller ticket sized, well diversified and granular loan book across all product offerings and geographies. Further, while the HFC is building sales distributions organically through teams spread across different branches and locations, it has also built alliances with multiple established partners to complement customer acquisitions through onward lending arrangements that are risk backed in the form of first loss default guarantees (FLDGs) and service guarantees. CIFL’s loan portfolio (consolidated; CIFL & CIHL) grew to Rs. 1133.81 Cr. as on March 31, 2022 from Rs. 700.16 Cr. as on March 31, 2021 and stood at Rs. 1097.31 Cr. as on December 31, 2022.
Apart, from its lending-based activities of Capital India group has also developed its feebased business namely RemitX. Capital India under the brand name of RemitX holds AD II license from RBI (since Sep 2020) to conduct foreign exchange business. RemitX is an integrated foreign exchange service provider and focuses on provide end to end forex and travel solutions leveraging technology. Capital India Finance Limited has been diversifying its revenue stream by focusing on developing its fee-based services like Forex business under the brand name of RemitX (AD II license) which has generated total volumes of ~Rs. 2400 Cr. during FY2022 as against ~Rs. 260 Cr. during FY2021.
 

­Susceptibility of the credit profile to large ticket exposures 
CIFL (NBFC and HFC) commenced its lending operations in 2017. The NBFC is engaged in extending credit towards SME segment in form of Loan against Property and also extends corporate/structured finance loans. Currently it has expanded its borrower base and has been focusing on SME business class and has significantly reduced their exposure to commercial real estate, wherein no new disbursements have been made. HFC focuses on affordable housing segment. At the initial stage of its growth the company (NBFC) had focused primarily on the real estate sectors with large ticket sizes ranging between Rs. 10 – 40 Cr. The company’s top 20 exposures (mostly real estate exposures) comprised 72 percent of the book (consolidated) as on March 31, 2020. Following the challenges in overall economic conditions in FY2020, the group shifted its focus towards building a relatively granular book. Consequently, CIFL has introduced various small ticket loans with new disbursements having ticket sizes ranging between Rs. 5 lakhs to Rs. 1 Cr. The company has also bought down its exposure towards its top 20 borrowers to ~28 percent of the CIFL’s portfolio as on March 31, 2022 and to ~22 percent as on December 31, 2022. As a result, CIFL’s portfolio having ticket size in the range of Rs. 30-40 Cr. has reduced to ~4 percent as on March 31, 2022 as compared to 28.14 percent as on March 31, 2020. Although, the company has reduced its exposure to real estate segment and deployed the funds so released towards other relatively granular non-real estate avenues, it is pertinent to note that real estate sector has been facing significant challenges on account of the overall tepid environment and slowdown in offtake of projects. Despite the challenges relating to covid/ moratorium, the company could rationalize its Real Estate book from FY2020 to FY2022 which provides some comfort. CIFL’s loan portfolio (consolidated) increased to Rs. 1133.81 Cr. as on March 31, 2022 from Rs. 700.16 Cr. as on March 31, 2021 and stood at Rs. 1097.31 Cr. as on December 31, 2022. The SME and Housing portfolio of CIFL has relatively low seasoning, with HFC portfolio having around 50 percent of the outstanding portfolio (standalone) comprising of tenure more than 15 years as on March 31, 2022. Housing Finance portfolio comprises ~63 percent of outstanding portfolio of CIHL (standalone) as on March 31, 2022. While, CIFL’s overall consolidated asset quality remained healthy with GNPA of 0.45 percent as on December 31, 2022 (0.26 percent as on March 31, 2022), its on-time portfolio declined to 80.04 percent as on December 31, 2022 as compared to 91.71 percent as on March 31, 2021. The increase in delinquencies in softer buckets (upto 90 dpd) was observed, majorly comprising CIFL’s exposure to commercial real estate portfolio as on December 31, 2022, which the Group is focusing on reducing. The company had contained slippages for 90+ dpd and was thus able to manage its GNPA levels. The increase in delinquencies in softer buckets is attributable to on-going economic environment.
The ability of CIFL to maintain the growth in its Assets Under Management (AUM) by expanding in non-real estate segments, while maintaining its profitability margins and containing its asset quality pressures will be key monitorable.