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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 100.00 | ACUITE A- | Stable | Assigned | - |
| Bank Loan Ratings | 300.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 400.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the Rs. 300.00 Cr. bank facilities of Capital India Home Loans Limited (CIHL). The outlook remains ‘Stable’.
Acuité has also assigned the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the Rs. 100.00 Cr. bank facilities of Capital India Home Loans Limited (CIHL). The outlook is ‘Stable’. The rating continues to factor in Capital India Group’s seasoned management, significant support from investors and strong resource raising ability. The rating takes into account strong capitalization level of the Capital India Group with networth of Rs. 574.56 Cr. and leverage of 1.56 times as on March 31, 2023 (Rs. 556.31 Cr. and leverage of 1.31 times as on March 31, 2022) (consolidated CIFL & CIHL; excl. non-controlling interest). The rating also factors in asset quality marked by consolidated (CIFL & CIHL) GNPA of 0.78 percent as on March 31, 2023 (0.27 percent as on March 31, 2022) with some delinquencies in softer buckets as the portfolio gains seasoning. CIFL has been reducing its exposure in the wholesale segment which was bought down to ~24 percent as on March 31, 2023 from ~37 percent as on March 31, 2022 for CIFL standalone. Acuité has also noted a shift towards more granular SME lending (~63% of the portfolio) which is expected to provide some cushion against asset quality shocks going forward and diversification of its revenue streams by venturing into fee-based businesses i.e forex and remittance businesses. The rating further derives support from the sustained profitability achieved in the housing finance division and forex & remittance business. CIHL’s loan portfolio grew to Rs. 379.97 Cr. as on March 31, 2023 (FY2022: Rs. 239.19 Cr.). Similarly, forex & remittance business witnessed significant surge in volumes by3.5x during FY2023 as against FY2022. Some of these rating strengths however, are constrained with moderate profitability of the Capital India Group as seen in PAT of Rs. 18.33 Cr. as on March 31, 2023 as against Rs. 12.26 Cr. as on March 31, 2022 (consolidated CIFL & CIHL). The branch expansion and the Group’s focus on granular portfolio resulting in lower yields have resulted in moderate profitability, albeit improvement. The rating also takes into consideration the rise in delinquencies in absolute terms as the portfolio gains seasoning. |
| About the Company |
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About Capital India Home Loans Limited
Capital India Home Loans Limited (CIHL), incorporated in 2017, extends credit towards affordable home loan segment. CIHL is a Housing Finance Company (HFC) registered with National Housing Bank (NHB). CIHL is a subsidiary of CIFL with 99.96 percent shareholding. The day-to-day operations of CIHL are managed by seasoned professionals and the Board comprises of 5 Directors, out of which 3 are independent Directors. The company is led by Mr. Vineet Kumar Saxena ( CEO) and Mr. Keshav Porwal (MD - CIFL) each having an experience of nearly two decades in financial services. Dr. Harsh Kumar Bhanwala is an Executive Chairman of the Capital India Group. CIHL’s loan portfolio (standalone, own book) grew to Rs. 348.06 Cr. as on March 31, 2023 from Rs. 221.98 Cr. as on March 31, 2022 (FY2021: Rs. 137.02 Cr.). Secured portfolio comprised around 95 percent of the portfolio of CIHL on March 31, 2023. ~57% of the portfolio has a ticket size of less than Rs.0.25 Cr. as on March 31, 2023. CIHL is operating from 16 branches across 9 states with 28 branches as on March 31, 2023. About Capital India Finance Limited CIFL is a middle layer non deposit taking non-banking financial company (NBFC) registered with the Reserve Bank of India. The company is engaged in extending credit towards SME/MSME segment in form of Loan against Property and also extends corporate/structured finance loans. Presently, the company has expanded its borrower base and has been focusing on SME business class from their earlier exposure towards commercial real estate. The company commenced its lending operations in November 2017. Presently, CIFL is led by Dr. Harsh Kumar Bhanwala (Executive Chairman), Mr. Keshav Porwal (Managing Director) and Mr. Vineet Kumar Saxena ( CEO), each having an experience of nearly two decades in financial services. The company’s equity is listed on the Bombay Stock Exchange (BSE) and has a market capitalisation of Rs. 730.70 Cr as on March 31, 2023. Around 73 percent of CIFL’s equity is held by Capital India Corp Private Limited (erstwhile Capital India Corp LLP) which is promoted by Mr. Sumit Narvar. Mr. Narvar is a businessman who is engaged in development of commercial and residential real estate projects in India and also has investment in Fintech space. Besides the promoter holding, CIFL has been able to attract funding from reputed investors such as Dharampal Satyapal Limited, RJ Corp Limited, Sudhir Power Limited among others. |
Analytical Approach
| Extent of Consolidation |
| •Proportionate or Moderate Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| 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, 2023, 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, 2023 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. |
Key Rating Drivers
| Strength |
| 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 (CEO ). 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. 574.56 Cr. as on March 31, 2023 (Rs. 556.31 Cr as on March 31, 2022). The company’s capital adequacy ratio remains comfortable with capital adequacy of 35.92 percent for CIFL (standalone) and 58.10 percent for CIHL (standalone) as on March 31, 2023 (41.08 percent for CIFL (standalone) and 81.80 percent for CIHL (standalone) as on March 31, 2022). CIFL has low gearing levels at 1.56 times as on March 31, 2023 (1.31 times as on March 31, 2022) (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. 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 wholesale 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 (own book) (standalone) grew from Rs. 221.98 Cr. as on March 31, 2022 to Rs. 348.06 Cr. as on March 31, 2023. 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 service guarantees. CIFL’s loan portfolio (consolidated; CIFL & CIHL) grew from Rs. 1133.81 Cr. as on March 31, 2022 to Rs. 1268.76 Cr. as on March 31, 2023. 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. 8560 Cr. during FY2023 as against ~Rs. 2466 Cr. during FY2022. |
| Weakness |
| 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 extended wholesale loans. Currently it has expanded its borrower base and has been focusing on SME business class and has significantly reduced their exposure to wholesale, wherein no new disbursements have been made under real estate. 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. 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 wholesale portfolio stands at ~24% of the NBFC book and and ~31% of this remains in the softer delinquency buckets. Although, the company has reduced its exposure to real estate segment (6% of the total book as on March 31, 2023) 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. However since the proportion of real estate is low and the company has demonstrated recoveries in the real estate portfolio, Acuite believes that the impact would be relatively lower. CIFL’s loan portfolio (consolidated; CIFL & CIHL) grew from Rs. 1133.81 Cr. as on March 31, 2022 to Rs. 1268.76 Cr. as on March 31, 2023. 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, 2023. Housing Finance portfolio comprises ~72 percent of outstanding portfolio of CIHL (standalone) as on March 31, 2023. While, CIFL’s overall consolidated asset quality remained healthy with GNPA of 0.76 percent as on March 31, 2023 (0.26 percent as on March 31, 2022), its on-time portfolio stood at ~85%. 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. |
| ESG Factors Relevant for Rating |
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Capital India Finance Limited (CIFL) belongs to the Non-Banking Financial Companies (NBFC) sector which complements bank lending in India. Some of the material governance issues for the sector are policies and practices with regards to business ethics, board diversity and independence, compensation structure for board and KMPs, role of the audit committee and shareholders’ rights. On the social aspect, some of the critical issues for the sector are the contributions to financial inclusion and community development, sustainable financing including environmentally friendly projects and policies around data privacy. The industry, by nature has a low exposure to environmental risks. While CIFL was earlier engaged in extending wholesale credit towards real estate, LAP and corporate/structured finance loans, it has expanded its borrower base and has been focusing on SME loans which supports financial inclusion by financing of smaller businesses. The Capital India's board comprises of a total of six directors out of which four are independent directors and includes one female director. The executive chairman of the board is Dr Harsh Bhanwala who has been the ex- Chairman of NABARD with significant experience in financially inclusive businesses. The group companies maintains adequate disclosures with respect to the various board level committees mainly audit committee, nomination and renumeration committee along with stakeholder management committee. The group companies also maintains adequate level of transparency with regards to business ethics issues like related party transactions, investors grievances, litigations, and regulatory penalties for the group, if relevant. In terms of its social impact, CIFL is actively engaged in community development programmes through its CSR activities
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| Rating Sensitivity |
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| Material Covenants |
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CIHL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality, among others.
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| Liquidity Position |
| Adequate |
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Business growth of CIFL has majorly been supported by equity funds, the company has now started to leverage its capital structure as reflected in gearing of 1.56 times as on March 31, 2023 (1.31 times as on March 31, 2022) (consolidated; CIFL & CIHL). CIFL at consolidate level was able to obtain fundings from banks/lenders in the form of Term loans and Working capital facilities in FY2023. CIFL on a stand alone basis have an obligaliton of ~87 Cr. for Q2FY24 (NCD obligation of Rs. 25 Cr already paid) . The company had total cash and cash equivalents of ~Rs. 270 Cr., as on June 30, 2023 (consolidated; CIFL & CIHL). The liquidity position of the company is expected to support the business growth of the company over the near term.
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| Outlook : Stable |
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Acuité believes that CIFL’s consolidated credit profile will be supported by its experienced management, support from resourceful promoters’/investor base and healthy capitalisation level. The outlook may be revised to ‘Positive’ in case the company is able to scale up its loan book significantly while maintaining its asset quality and profitability metrics. Conversely, the outlook may be revised to ‘Negative’ in case of significant deterioration in asset quality/ profitability metrics or increased concentration in portfolio towards real estate sector.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| Key Financials (Consolidated) | ||||||||||||||||||||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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| Note on Complexity Levels of the Rated Instrument |
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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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) |
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1. Capital India Finance Limited 2. Capital India Home Loans Limited 3. Capital India Assets Management Private Limited |
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