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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 30.00 | ACUITE BBB- | Stable | Upgraded | - |
| Total Outstanding | 30.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) from 'ACUITE BB+' (read as ACUITE double B plus) on the Rs. 30.00 crore bank facilities of Embaby General Finance India Private Limited (EGFL). The outlook is ‘Stable’. The company has migrated from an issuer not cooperating tag to regular. Rationale for the rating The rating takes into account the healthy asset quality, marked by an on time portfolio at 98.67 percent as of March 31, 2024 and comfortable capitalisation levels. CRAR stood at 33.21 percent (Tier 1: 31.36 percent) as on March 31, 2024 and gearing levels stood steady at 1.86 times as of March 31, 2024. The rating further takes into consideration steady profitability metrics supported by growth in disbursals. The company reported an increase in disbursements to Rs 152.06 Cr. as on March 31, 2024 from Rs 148.25 Cr. as on March 31, 2023. The rating further draws comfort from adequate risk management practises adopted by the company in order to mitigate risks and limit losses. The rating is, however, constrained by geographical concentration, modest scale of operations, limited financial flexibility, and the highly competitive business of lending against gold. Going forward, the company’s ability to raise capital, profitably scale-up its loan portfolio, and maintain asset quality will be key monitorables. |
| About the Company |
| Embaby General Finance India Private Limited (EGFL) a Non-Banking Financial Company (NBFC) incorporated in November 2008 and based out of Kattappana, in the Idukki district of Kerala, mainly operates by providing loans against collateral of gold jewellery primarily to individuals having limited or no access to formal credit to meet their short term personal requirements. The promoter, Mr. E.M. Baby, has been operating in this business since 1966. Over the years, the company has expanded its presence across two districts (i.e., Idukki and Kottayam) with branch base of 23 as on March 31, 2024. The operations will remain confined to the state of Kerala over the medium term. Apart from loans against gold jewellery, it also provides money transfer facilities in India, foreign inward money transfer services, encashment of foreign currencies, etc. EGFL is the flagship company of the E.M. Baby Group, which also operates in hospitality, trade distribution, finance, industry, money exchange, and general insurance. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone financial and business risk profile of EGFL to arrive at the rating. |
| Key Rating Drivers |
| Strength |
| Experienced promoters EGFL, a Kerala based NBFC was promoted by Mr. Edavanamadathil Mathai Baby (Chairman). Currently, the operations are managed by Mr. Rajesh Baby (Managing Director & CEO), who has more than two decades of experience in gold business & financing, and a decade of experience in wholesale business. Given the group’s long track record of operations, they have established a presence in other businesses. The late Mr. Edavanamadathil Mathai Baby, held 37.01 percent of shares as of December 31, 2021 with the remaining stake being held by other family members of Mr. E.M. Baby. Presently, Lizamma Baby holds 37.00 percent of shares as of March 31, 2024. Mrs. Lizamma Baby (Director) and Mr. Ramesh Baby (Executive Director) have extensive experience of over four decades and two decades, respectively, in gold business and financing. Promoters have also inducted experienced professionals with experience in the banking and retail segments. Acuité believes that EGFL will continue to benefit from the established presence and experience of the promoters in the gold loan segment. Healthy Asset Quality EGFL’s loan portfolio stood at Rs. 52.72 Cr. as on March 31, 2024 as compared to Rs. 47.10 Cr. in FY2023 with an average tenure of 12 months. Asset quality has remained healthy, as evidenced by the on time portfolio at 98.67 percent for FY2024. On time dpd profile has remained in the range of 95 - 99 percent since FY2019 till YTD. Gross NPA stood at 0.34 percent (NNPA: - 0.32 percent) as of March 31, 2024 as against 2.08 percent (NNPA: - 1.76 percent) as of March 31, 2023. The company has adequate risk management systems and mechanisms in place with respect to the assessment and storage of gold ornaments. The company has an audit team that undertakes branch audits and surprise verifications of the pledged gold jewellery. Going forward, Acuité believes that stringent risk management policies provide comfort and are expected to keep asset quality under control, however, risk arising from adverse gold prices would be critical. Modest profitability metrics: The company’s profitability metrics have seen a steady trend on account of stable growth in disbursements. The company reported disbursements of Rs 152.06 Cr. for the year FY 2024 as against Rs 148.25 Cr. during FY 2023. The company has reported Net Interest Income of Rs 5.83 Cr. for FY2024 and Rs 6.08 Cr. during FY 2023. This has resulted in PAT of Rs 1.03 Cr. for FY2024 and Rs 1.29 Cr. during FY 2023. The slight decline in the PAT is on account of branch expenses and overhead costs during FY2024. Consequently, ROAA stood at 1.72 percent (annualised) as on March 31, 2024 and 2.14 percent as on March 31, 2023. |
| Weakness |
| Small scale of operations with high geographical concentration The average tenure of all gold loans disbursed by the company is 12 months. The rate of interest is dependent on the tenure of the loan. The company’s AUM stood at Rs 52.82 Cr. as on March 31, 2024 and Rs 47.04 Cr. as on March 31, 2023. The company reported disbursements of Rs 152.06 Cr. for FY2024 and Rs 148.25 Cr. during FY 2023. It has presence across 2 districts in Kerala (i.e. Idukki and Kottayam) with branch base of 23 as on March 31, 2024. 94.55 percent of the branch concentration is in the Idukki district. EGFL is a small sized but a stable growing player in the lending against gold jewellery. The operations will remain confined to the state of Kerala over the medium term. Going forward, Acuité believes that geographical concentration will continue to weigh on the company’s credit profile. Limited financial flexibility The capital structure of EGFL is supported by a net worth of Rs. 21.01 Cr, Total Debt of Rs. 39.17 Cr. and resultant gearing of 1.86 times as on March 31, 2024. EGFL has a modest resource profile with a relationship with only two banks. The other funding source includes privately placed debentures, placed with close friends and relatives, and remains largely dependent on promoters for funding requirements. Acuite believes that the ability of the company to mobilise additional funding through debt/equity will be critical. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
| EGFL’s overall liquidity profile remains adequate, with no negative cumulative mismatches in near to medium term as per the ALM dated March 31, 2024. The company has Rs. 1.48 Cr. of encumbered cash and cash equivalents as on March 31, 2024. |
| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Net Interest Income plus other income |
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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 • 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 |
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