Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 100.00 ACUITE BBB | Stable | Assigned -
Bank Loan Ratings 100.00 ACUITE BBB | Stable | Reaffirmed -
Non Convertible Debentures (NCD) 150.00 ACUITE BBB | Stable | Assigned -
Total Outstanding 350.00 - -
 
Rating Rationale

­Acuité has reaffirmed the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs.100.00 Cr. Bank Loan facility of KLM Axiva Finvest Limited (KLM). The outlook is 'Stable'.

­Acuité has assigned the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs.100.00 Cr. Bank Loan facility of KLM Axiva Finvest Limited (KLM). The outlook is 'Stable'.

­Acuité has assigned the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs.150.00 Cr. Non Convertible Debentures of KLM Axiva Finvest Limited (KLM). The outlook is 'Stable'.

Rationale for Rating
The rating reaffirmation continues to factors in the growth in the scale of operations in the recent years, adequate capitalization level and moderate; albeit improving earning profile. The AUM of the company grew by 17 percent in FY2024 to Rs 1,705 Cr. from Rs 1,460 Cr. in FY2023. The growth in AUM was owing to the uptick in disbursements. KLM disbursed loans amounting to Rs 3,393 Cr. in FY2024 as against Rs 2,624 Cr. in FY2023. KLM's capital adequacy ratio stands adequate at 23.66 percent with Tier 1 capital of 15.61 percent which is well above the regulatory minimum. KLM's profitability improved as reflected in its ROAA of 1.25 percent in FY2024 as against 1.15 percent in FY2023. KLM reported PAT of Rs 23.03 Cr. in FY2024 as against Rs 18.33 Cr. in FY2023. However, as the company is in expansion phase its operating expense  to earning assets moderated to 7.66 percent in FY2024 as against 7.45 percent in FY2023. The operational costs are expected to rationalise in the coming years once the operational efficiency from the new branches is attained.
These strengths are partially offset by the company's geographical and funding profile concentration. The company's operations are highly concentrated in the states of Kerala (54 percent) and Karnataka (23 percent) as on Dec 2023. KLM's resource profile is concentrated towards the NCDs (public issued and privately placed) and sub-debt forming ~90 percent of the total borrowings as on FY2024. though the share of bank loans have been increasing it remains modest. 
Going forward company's ability to continue increasing its scale of operations while maintaining its asset quality and improving its profitability metrics and mobilizing low cost funds will be key monitorable

About the company
­Hyderabad based KLM Axiva Finvest Limited was incorporated in 1997 as Needs Finvest Limited and in 2014, the current management took over and renamed it to KLM Axiva Finvest Limited . The company is led and promoted by the whole-time Director Mr Shibu Theckumpurath Varghese. As on December 31, 2023, 42.27% of the shareholding is held by promoters, directors and their relatives and the balance is held by other investors.
The company is engaged in lending business and offers gold loan, mortgage loan, vehicle loans, micro finance loans, etc. The company also provides foreign exchange services, money transfer and insurance broking services. The company has its branches in Andhra Pradesh, Tamil Nadu, Kerala, Hyderabad, Karnataka & Maharashtra.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach
Acuité has adopted a standalone approach to analyse the business and financial profile of KLM Axiva Finvest Limited­
 
Key Rating Drivers

Strength
­Promoter support and experienced management team;
The company is headed by Mr. Shibu Varghese (whole time director) who has more than 30 years of experience in the Financial Services and is supported by seasoned professionals for the daily operations. The current promoters took over the company in 2014 and have been running the company for a decade now with the support of management having an extensive experience of over a decade in the industry. The company benefits from the rich experience of the promoters in the home state which remained significant for the overall capital raising capability of the company.
Acuite believes that company will continue to benefit from the extensive experience of the promoters and management team along with Independent Director.

Healthy growth in AUM and improving asset Quality;
KLM’s AUM grew by 17 percent year on year to Rs. 1,705 Cr. as on March 31, 2024 as against Rs. 1,460 Cr. as on March 31, 2023 (Rs. 1073 Cr. as on March 31, 2022). The growth in AUM was owing to the uptick in disbursements, growth in number of branches and much focused business drives conducted by the company. KLM’s Loan against gold contributes 65 percent to the total POS as on December 31, 2023, as the company now focuses to grow its gold loan book has aided in the improvement of its asset quality. The company’s asset quality is marked by on time portfolio of 94.45 percent as on Dec 2023 as against 92.82 percent as on March 2023. KLM’s asset quality improved from 1.84 percent GNPA and 0.82 percent NNPA in FY23 to 1.6 percent GNPA and 0.67 percent in FY24. (FY22: GNPA: 4 percent; NNPA: 2.70 percent). The prudent underwriting policies adopted by the management and improving collection efficiency has enabled the company to improve its asset quality.  
Acuité believes that going forward the ability of the company to maintain comfortable asset quality and growth momentum in AUM will be key rating sensitivity.
Moderate; albeit improving earning profile;
The growth in scale of operation in FY2023 is reflected in the interest income which grew to Rs 305.62 Cr. in FY2024 from Rs 275.40 Cr. in FY2023. However, as the company is in expansion phase its operating expense to earning assets moderated to 7.66 percent in FY2024 as against 7.45 percent in FY2023. The operational costs are expected to rationalise in the coming years once the operational efficiency from the new branches is attained. The company has reported a PAT of Rs 23.03 Cr. with ROAA of 1.25 percent during FY2024 as against PAT of Rs 18.33 Cr. and ROAA of 1.15 percent during FY2023.
Acuité believes that KLM will be able to sustain its financial performance and any impact on profitability metrics due to higher provisioning requirements would remain key monitorable­

Weakness
­Leveraged capital structure;
KLM is engaged in loans against gold and SME loans secured and unsecured for a period of 12 - 24 months. The company’s networth stood at Rs. 271.92 Cr. and total debt stood at Rs. 1,606 Cr. as on March 24. The company’s AUM stood at Rs. 1,705 Cr. as on March 24 as compared to Rs. 1,460 Cr. as on  March 31,2023 . KLM’s gearing stood at 5.91 times as on March 24 (5.43 times as on March 31, 2023). The total debt of Rs 1606 Cr. includes subordinated liabilities amounting to Rs 771.60 Cr. as on March 2024. To support the growth momentum KLM would require further debt and considering the already leveraged capital structure the promoters may be required to infuse additional equity to support any future business growth.
Going forward, Acuité believes that the company’s ability to manage its gearing levels will be a key monitorable and infusion of capital would be required for containing gearing levels and to support business growth.

Geographical and Funding profile concentration;
KLM started its operations in the state of Kerala and gradually expanded to the states of Karnataka and Tamil Nadu and has recently expanded to other states like Hyderabad, Andhra Pradesh and Maharashtra thereby reducing the concentration in the state of Kerala. However, major concentration is in the state of Kerala with exposure of 54% as on Dec, 2023. KLM's resource profile is concentrated towards the NCDs (public issued and privately placed) and sub-debt forming 90 percent of the total borrowings as on Mar'24; though the share of bank loans have been increasing it remains modest. 
Acuite believes that geographical concentration coupled with improved earning profile will continue to weigh on the company’s credit profile.
Rating Sensitivity
­
  • Movement in capital structure and timely infusion of capital
  • Movement in Cost of borrowing and maintenance of adequate liquidity
  • Movement in AUM and its impact on asset quality
  • Movement in profitability metrics.
  • Movement in asset quality
  • Changes in Regulatory environment
 
Liquidity Position
Adequate
­KLM’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated December 31, 2023. ALM is comfortable mainly on account of shorter tenor of loans provided by KLM with access to longer tenure borrowings. As on March 31, 2024, the company had cash and bank balance of about Rs 68.08 Cr.
 
Outlook: Stable
­Acuité believes that KLM will maintain ‘Stable’ outlook over the near to medium term supported by the sustainable growth in its profitability along with timely infusion of capital. The outlook may be revised to ‘Positive’ in case of significant and sustainable growth in its AUM while maintaining profitability, asset quality and capitalization indicators. The outlook may be revised to ‘Negative’ if the company faces challenges in raising fresh equity or long- term debt funding commensurate with its near-term business requirements and higher than expected deterioration in asset quality and profitability
 
Other Factors affecting Rating
­None
 
Key Financials - Standalone / Originator
­
Particulars Unit FY24 (Actual) FY23 (Actual)
Total Assets Rs. Cr. 1955.59 1715.12
Total Income* Rs. Cr. 161.16 134.31
PAT Rs. Cr. 23.03 18.33
Networth Rs. Cr. 271.97 254.57
Return on Average
Assets (RoAA)		 (%) 1.25 1.15
Return on Net Worth (RoNW) (%) 8.86 9.21
Total         Debt/Tangible
Net Worth (Gearing)		  
Times		 5.91 5.43
Gross NPA (%) 1.60 1.84
Net NPA (%) 0.67 0.82
*Total income equals to Total Income net off interest expense
 
Status of non-cooperation with previous CRA (if applicable):
­Not Applicable
 
Any other information
­None
 
Applicable Criteria
• 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
• Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.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
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
22 Feb 2024 Cash Credit Long Term 25.00 ACUITE BBB | Stable (Assigned)
Proposed Long Term Bank Facility Long Term 11.07 ACUITE BBB | Stable (Assigned)
Term Loan Long Term 25.00 ACUITE BBB | Stable (Assigned)
Term Loan Long Term 38.93 ACUITE BBB | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 25.00 Simple ACUITE BBB | Stable | Reaffirmed
Dhanlaxmi Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 9.00 Simple ACUITE BBB | Stable | Reaffirmed
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 2.36 Simple ACUITE BBB | Stable | Reaffirmed
Not Applicable Not avl. / Not appl. Proposed Long Term Loan Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 100.00 Simple ACUITE BBB | Stable | Assigned
Not Applicable Not avl. / Not appl. Proposed Non Convertible Debentures Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 150.00 Simple ACUITE BBB | Stable | Assigned
South Indian Bank Not avl. / Not appl. Secured Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 10.00 Simple ACUITE BBB | Stable | Reaffirmed
State Bank of India Not avl. / Not appl. Term Loan 30 Apr 2022 Not avl. / Not appl. 30 Nov 2026 32.12 Simple ACUITE BBB | Stable | Reaffirmed
State Bank of India Not avl. / Not appl. Term Loan 25 Jul 2023 Not avl. / Not appl. 25 Jun 2026 21.52 Simple ACUITE BBB | Stable | Reaffirmed

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