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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 15.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 15.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs. 15.00 crore bank facilities of Grameen Shakti Microfinance Private Limited (GSMPL). The outlook is ‘Stable’.
Rating Rationale The rating factors in experienced management, established presence in its areas of operation and moderate capitalization level. GSMPL’s Capital Adequacy ratio (CAR) reduced to 27.24 percent as on March 31, 2022, from 30.09 percent as on March 31, 2021, on account of improvement in risk weighted assets. The rating also factors improvement in AUM owing to growth in disbursements in Managed portfolio. The company’s AUM stood at Rs 56.52 Cr. as on March 31, 2022, in comparison to Rs 44.43 Cr as on March 31, 2021. The company reported further growth in AUM to Rs 71.58 Cr. as on December 31, 2022. The rating also factors adequate asset quality due to prudent underwriting practices. The company reported a GNPA of 1.17 percent and NNPA of 0.59 percent as on December 31, 2022. The rating is however constrained by limited scale of operations, geographical concentration and modest financial performance albeit improving. Improvement in earnings profile is due to growth in AUM and disbursements. The company reported a PAT of Rs 1.57 Cr. during FY 2021-22 as compared to Rs 0.19 Cr. during FY 2020-21. The company reported a ROAA of 2.91 percent as on March 31, 2022 compared to 0.33 percent as on March 31, 2021. |
| About the company |
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West Bengal based Grameen Shakti Microfinance Private Limited (GSMPL) is a non-deposit taking NonBanking Financial Company – Micro Finance Institution (NBFC-MFI). The company is promoted by Mr. Ganesh Chandra Modak. Mr. Modak has been engaged in micro financing activities since 2004 when he established a society named Society for Model Grambikash Kendra for the social welfare and development along with microfinancing activities. In 2016, he then acquired an existing NBFC Srija Chemo Private Limited and renamed it to Grameen Shakti Microfinance Private Limited. GSMPL extends micro-credit primarily to women borrowers through Joint Liability Group (JLG) model. The company operates in the states of West Bengal, Bihar and Jharkhand through a network of 27 branches across 17 districts as on December 31, 2022.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of GSMPL to arrive at the rating.
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Key Rating Drivers
| Strength |
| Established presence in micro-finance segment.
GSMPL commenced its micro-finance operations in 2017, extending micro-credit to women borrowers engaged in income-generating activities under Joint Liability Group (JLG) model. The company caters to the rural and semi-urban areas of West Bengal, Bihar and Jharkhand. GSMPL focuses on providing financial assistance by way of providing micro-credit to the poor and underprivileged women in the society who are engaged in some income-generating activities. The company commenced its operations in West Bengal and has expanded its presence in the states of Bihar and Jharkhand with a network of 27 branches across 17 districts with a loan portfolio of Rs. 71.58 Cr. as on December 31, 2022 (March 31, 2022 56.52 Cr.). GSMPL is promoted by Mr. Ganesh Chandra Modak who has around two decades of experience in microfinance segment. He has been previously engaged with South Asia Research Society (NGO-MFI) since 1992 before establishing Society for Model Grambikash Kendra in 2004. Mr. Modak is well supported by his management team having experience in microfinance segment. As on FY2022, GSMPL has reported capital adequacy ratio (CAR) and leverage of 27.24 percent and 3.13 times (March 31, 2021: 30.09 percent and 2.86 times). As on December 31, 2022, CAR and leverage stood at 34.78 percent and 2.91 times respectively, the improvement in CAR is mainly on account of growth in off-book portfolio. The company has Rs. 26.78 Cr. of funds in pipeline from various banks like State Bank of India , Ananya Finance for Inclusive growth, FWWB, Grow money Capital Pvt Ltd, KVVS-Milaap, Usha Financial Services Pvt Ltd, Electronica Finance Limited and Nabsamruddhi Finance Limited. The company has BC partnership with Ananya Finance for Inclusive growth, Monexo Fintech Private Ltd, ESAF Small Finance Bank, Catholic Syrian Bank (CSB) and SMGBK.
Acuité believes that established presence of the promoters in the microfinance segment will be central to support the business risk profile of the company in the near to medium term. |
| Weakness |
| Modest scale of operations and Financial Risk Profile:
GSMPL has been in the micro-finance lending segment since 2017. The company has been able to build a portfolio of Rs. 71.58 Cr. as on December 31, 2022. Of the total AUM of Rs 71.58 Cr. , on book portfolio comprised Rs 40.51 Cr. (`57 percent) with the balance Rs 31.07 Cr. (`43 percent) being off book portfolio. The company’s AUM stood at Rs 56.52 Cr. as on March 31, 2022, as compared to Rs 44.43 Cr. as on March 31, 2021. Of the total AUM of Rs 56.52 Cr., on book portfolio comprised Rs 50.95 Cr. (`90 percent) with the balance Rs 5.57 Cr. (`10 percent) being off book portfolio. Improvement in earnings profile is due to growth in AUM and disbursements. The company reported a PAT of Rs 1.57 Cr. during FY 2021-22 as compared to Rs 0.19 Cr. during FY 2020-21. The company reported a ROAA of 2.91 percent as on March 31, 2022, compared to 0.33 percent as on March 31, 2021. The company’s NIM reduced to 9.21 percent as on March 31, 2022 as compared to 10.74 percent as on March 31, 2021 due to introduction of CGS Loan at lower interest rates.
Risk inherent to microfinance segment; challenging operating environment may result in elevated stress in asset quality: The activities of microfinance companies like GSMPL are exposed to concentration risks. GSMPL has presence in 3 states with a concentration in West Bengal (~59.33 percent), Bihar (~30.22 percent) and Jharkhand (~10.45 percent) of total portfolio as on December 31, 2022. This exposes the company to high geographical concentration risk. Thus, the company's 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. Besides geography, the company will be exposed to competition and any changes in the regulatory framework, thereby impacting the credit profile of GSMPL. Acuité believes that constraining additional slippages while maintaining the growth in the loan portfolio will be crucial. |
| Rating Sensitivity |
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| Material Covenants |
| GSMPL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality, among others. |
| Liquidity Position |
| Adequate |
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GSMPL’s overall liquidity profile remains moderate in near to medium term. GSMPL’s borrowings stood at ~Rs. 42.06 crore with a gearing of ~2.91 times as on December 31, 2022 (provisional). The company also avails a cash credit facility almost fully utilized. It has maintained cash and bank balance of ~Rs. 9.69 crore as on December 31, 2022 (Provisional). As per ALM statement dated December 31, 2022, the company’s assets and liabilities are well matched with no deficit in any of the time buckets upto 5 years.
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| Outlook: Stable |
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Acuité believes that GSMPL will maintain a 'Stable' outlook over the medium term supported by its established presence in the microfinance segment. 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.
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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 |
| 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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