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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 275.00 | ACUITE A | Stable | Upgraded | - |
| Non Convertible Debentures (NCD) | 100.00 | ACUITE A | Stable | Upgraded | - |
| Non Convertible Debentures (NCD) | 30.00 | PP-MLD | ACUITE A | Stable | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 405.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has upgraded the long term rating of ‘ACUITE A-’ (read as ACUITE A minus) to ‘ACUITE A’ (read as ACUITE A) on Rs. 275.00 cr. bank facilities of Finova Capital Private Limited (FCPL). The outlook is ‘Stable’.
Acuité has upgraded the long term rating of ‘ACUITE A-’ (read as ACUITE A minus) to ‘ACUITE A’ (read as ACUITE A) on Rs. 50.00 cr. non convertible debentures of Finova Capital Private Limited (FCPL). The outlook is ‘Stable’. Acuité has upgraded the long term rating of ‘ACUITE PP-MLD A-’ (read as ACUITE Principal Protected Market Linked Debentures A minus) to ‘ACUITE PP-MLD A’ (read as ACUITE Principal Protected Market Linked Debentures A) on Rs. 30.00 cr. principal protected market linked debentures of Finova Capital Private Limited (FCPL). The outlook is ‘Stable’. Acuité has equated the the long term rating of 'ACUITE Provisional A' (read as ACUITE Provisional A) to ACUITE A-' (read as ACUITE A minus) for Rs. 50 Cr. proposed non-convertible debentures and now upgraded to ‘ACUITE A’ (read as ACUITE A). The outlook is ‘Stable’. Reason for revision in Rating The revision in rating is on account of recent capital infusion via CCPS of Rs. 405 Cr. in March 2022 The investors for this round of capital infusion comprise new and existing investors: Norwest Capital (Rs. 288 Cr.), Maj Invest (Rs. 143 Cr.) and Faering Capital (Rs. 19 Cr.). The rating reflects the healthy capitalization and capital buffers reflected through Capital Adequacy Ratio (CAR) of 78.45 percent and leverage of 0.70 times as on March 31, 2022. The rating also factors in the significant traction shown in disbursements with AUM levels increasing to Rs. 948.19 Cr. as on March 31, 2021 from Rs. 585.92 Cr. as on March 31, 2021. The rating continues to factor in FCPL’s experienced management along with efficient risk management systems and collection process adopted by the company reflected in its on-time portfolio of 92.35 percent as on June 30, 2022. The rating further factors in FCPL’s diversified and strong resource raising ability and healthy financial risk profile. The rating is constrained by the modest scale of operations, geographically concentration of loan portfolio (~77 percent in Rajasthan) and low seasoning (~50 percent of outstanding portfolio with a seasoning less than 2 years). Further, the inherent risks of lending in this segment have been exacerbated by localised lockdowns and economic disruptions. Going forward, the ability of the company to scale up its operations while maintaining profitability will be key credit monitorable. |
| About the company |
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Incorporated in 2015, Finova Capital Private Limited (FCPL) is a Jaipur based NBFC promoted by Mr. Mohit Sahney who has over two decades of experience in retail banking and financial services. The company is engaged in extending MSME loans (secured against property) and Home loans. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of FCPL to arrive at the rating. |
Key Rating Drivers
| Strength |
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FCPL commenced its lending operations since March 2016 and extends MSME loans (secured against property) and Home loans. FCPL’s borrower profile comprise MSME units providing services, small traders, retailers, businessmen and other local small business operators primarily engaged in providing essential services. The company was founded by Mr. Mohit Sahney (MD & CEO) and Mrs. Sunita Sahney (Director). Mr. Mohit Sahney has an experience spanning over two decades in retail banking and financial services. He was earlier associated with ICICI bank and served in various capacities in different segments. Mr. Sahney has been able to bring on board marquee institutional investors like Sequoia Capital India Investment and Faering Capital.
FCPL’s networth stood at Rs. 918.47 Cr. as on March 31, 2022 and reported a healthy capital adequacy ratio (CAR) of 78.45 percent mostly comprising Tier 1 capital (78.05 percent). The company’s leverage indicators are healthy at 0.70 times as on March 31, 2022. The company has a diversified lender profile comprising Banks and NBFC/FI’s, with total debt of Rs. 613.26 Cr. outstanding as on June 30, 2022. FCPL was able to raise funds under TLTRO from PSB’s like Punjab National Bank and Bank of Baroda. The financial risk profile further improved with capital infusion of Rs. 450 Cr. in FY2022. The networth stood at Rs. 934.15 Cr. with a gearing of 0.66 times as on June 30, 2022. |
| Weakness |
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FCPL commenced its lending operation in March, 2016 extending MSME loans (secured against property) having an average tenure of upto 6-7 years. The company’s loan book of Rs. 948.19 Cr. as on March 31, 2022 has grown significantly from Rs. 585.92 Cr. as on March 31, 2021 and from Rs. 396.84 Cr. as on March 31, 2020. The outstanding loan portfolio stood at Rs. 1059.36 Cr. as on June 30, 2022. Due to substantial growth in loan book in the last couple of years, ~50 percent of the overall portfolio has a seasoning of less than two years as on September 30, 2020. |
| ESG Factors Relevant for Rating |
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Finova Capital Private Limited (FCPL) 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. FCPL is primarily engaged in extending MSME loans (secured against property) and home loans.
The board comprises of a total of six directors which comprises an independent director, one female director and three nominee directors. The company maintains adequate disclosures with respect to the various board level committees mainly audit committee, nomination and renumeration committee along with stakeholder management committee. The company 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, FCPL is actively engaged in community development programmes through its CSR activities. |
| Rating Sensitivity |
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| Material Covenants |
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FCPL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality among others. As per confirmation received from client the company is adhering to all terms and conditions stipulated as covenants by all its lenders/investors.
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| Liquidity: Adequate |
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FCPL’s overall liquidity profile remains adequate with no negative cumulative mis-matches in near to medium term as per ALM dated June 30, 2022. The company has unencumbered cash and cash equivalents of Rs. 66 Cr. as on March 31, 2022 and unencumbered bank deposits of Rs. 336.46 Cr. FCPL’s collections during June and July 2022 were ~98 percent of the scheduled collections. FCPL extends MSME loans (secured against property) with a focus on borrowers providing services, small traders, retailers, businessmen and other local small business operators, which are primarily engaged in providing essential services. The focus on such borrowers specially in current Covid situation has enabled the company to maintain its collection efficiency. Further, FCPL has been able to obtain funding through long term debt and through additional capital infusion from its existing investors. |
| Outlook: Stable |
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Acuité believes that FCPL will maintain a ‘Stable’ outlook over the near to medium owing to established track record of promoters and their resource raising ability along with demonstrated growth in loan portfolio while maintaining asset quality and profitability metrics. The outlook may be revised to ‘Positive’ in case of higher than envisaged growth in loan portfolio while maintaining profitability and asset quality metrics. Conversely, the outlook may be revised to ‘Negative’ in case of any deterioration in asset quality or profitability metrics.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable): |
| None |
| 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 |
| https://www.acuite.in/view-rating-criteria-55.htm |
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