Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 88.29 ACUITE BB+ | Stable | Downgraded | Negative to Stable -
Bank Loan Ratings 51.77 - ACUITE A4+ | Downgraded
Total Outstanding Quantum (Rs. Cr) 140.06 - -
 
Rating Rationale
­Acuité has downgraded the long-term rating from "ACUITE BBB-" (read as ACUITE triple B Minus) to ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs. 88.29 Cr. bank facilities of Power2SME Private Limited (P2S). The outlook is revised from ‘Negative’ to ‘Stable’.

Acuité has downgraded the short-term rating from 'ACUITE A3+ (read as ACUITE A three plus)to ‘ACUITE A4+’ (read as ACUITE A four  plus) on the Rs. 51.77 Cr. bank facilities of Power2SME Private Limited (P2S).

Rationale for the downgrade
The downgrade in the rating is on account of weak profitability metrics and moderate growth in operating revenue at a consolidated level. The profitability remained subdued due to high operating expenses. The group reported losses of Rs. 28.52 Cr in FY23 as compared to losses of Rs. 31.34 Cr in FY22 (losses for FY21: Rs 18.04 Cr.). Despite the increase in operating income from Rs. 703.22 Cr in FY22 to Rs 1056.68 Cr in FY23, the EBITDA continues to be muted on account of high cost purchases due to the moderate business volume. Acuite also takes into account the decline of AUM in the lending arm of the group Auriolus Finvest Pvt. Ltd. (AFPL) wherein the AUM saw a de growth from Rs. 70.42 Cr in FY22 to Rs. 61.31 Cr in FY23, further as on Jun-23 the AUM stood at Rs. 50.40 Cr. The GNPA deteriorated from 1.34 percent as on March-22 to 2.31 percent as on March-23. Acuite takes note of the improvement in the revenue profile of Auriolus Finvest in FY2023, reflected through increase in Interest Income of Rs. 10.36 Cr. in FY2023 as against Rs. 6.02 Cr.in FY2022. Accordingly, AFPL posted positive PAT of Rs. 0.22 Cr. in Q1FY24 as against the losses of Rs. 0.25 Cr. in FY23.
The rating continues to factor in the group’s experienced management and support from marquee investors. The capital support from the marquee investors, like Kalaari Capital, Accel, Inventus Capital and Mr. Nandan Nilekani has resulted in healthy capital structure and financial flexibility at the Group level. Power2SME Private Limited’s networth on a consolidated basis stood at Rs. 61.45 Cr. as on Mar 2023 with a leverage of 2.05 times. The investors have ~78 percent stake in the parent company as on March 31, 2023. The rating further factors in expectations of capital support from promoters/ investors in the near to medium term which shall be instrumental for scaling up business operations.

About the company
Power2SME Private Limited (Power2SME) is a private limited company incorporated in 2012. The company is engaged in the business of trading of Metals (majorly Steel & TMT), Polymers, Yarn, Chemicals etc and sells its product in domestic market. Headquartered in Gurugram, Power2SME has 5 offices spread across Mumbai, Chennai, Kolkata, Ahmedabad and Pune. The company is led and promoted by Mr. R. Narayan (Founder & CEO) with the support of marquee investors.
 
About the Group
Power2SME provides its B2B services through its digital ecosystem which delivers raw material procurement at competitive prices, MRO procurement, and access to finance to smaller SME’s with an objective to provide them with higher efficiencies and profitability. Power2SME functions as a 'buying club' and helps SMEs benefit from economies of scale as a result of volume purchase and buying power across a large network of manufacturers. The company has 2 wholly owned subsidiary companies named Jijo India Private Limited & Auriolus Finvest Private Limited. Jijo India Private Limited was incorporated in October 2012 and engaged in the business of trading of various products. Auriolus Finvest Private Limited was incorporated in October 2018 and engaged in lending to SME sector by extending working capital loans to them.
Power2SME Private Limited (Power2SME) is a private limited company incorporated in 2012.
The company is engaged in the business of trading of Metals (majorly Steel & TMT), Polymers, Yarn, Chemicals etc and sells its product in domestic market. Headquartered in Gurugram, Power2SME has 5 offices spread across Mumbai, Chennai, Kolkata, Ahmedabad and Pune. The company is led and promoted by Mr. R. Narayan (Founder & CEO) with the support of marquee investors.
 
Unsupported Rating
Acuite BB+/Stable
 
Analytical Approach
­Extent of Consolidation
Full Consolidation

Rationale for Consolidation or Parent / Group / Govt. Support

Acuité has considered the consolidated view on the business and financial risk profile of Power2SME Private Limited and its subsidiaries Auriolus Finvest Private Limited and others to arrive at the rating. The approach is driven by common management, shared brand, and strong operational and financial synergies between the group companies.
 

Key Rating Drivers

Strength
­Experienced management team driving business growth

Power2SME Private Limited (P2S) is led by Mr. R. Narayan (Founder & CEO). Mr. Narayan is a seasoned entrepreneur with around two decades of corporate experience. He was previously associated with working in sales and marketing profiles for Microsoft, Oracle and TATA Group. Having worked with SME segment closely and understanding their nuances he co-founded Denave India Private Limited a technology powered sales enabling services company. Later in 2012, with the support of marquee investors, Mr. Narayan founded Power2SME to further his cause to empower the SME segment. Mr. Narayan is supported by an experienced professional team with diverse expertise in areas of finance, treasury, investments, customer-ready technology solutions, networking alliances amongst others. Accel and Inventus Capital have board representation and P2S benefits from their expertise. Mr. Mahendran Balachandran (Partner – Accel) and Mr. Parag Dhol (Inventus Capital) are on the board of P2S.
The management team has been able to on-board various suppliers on their platform and blue-chip companies as customers to fulfill their MRO requirements like Vendata, Hindustan Zinc, Orient, L&T and others. P2S has seen an improvement in its NMV from 696.36 Cr FY22 to Rs.1046 Cr. for FY23. The company had seen a decline in NMV in FY21 (Rs 342 Cr), the decline was on account of company’s migration to new credit policies for its customers followed by slowdown in economy and country-wide lockdowns induced by pandemic. The company had earlier achieved an NMV of Rs. 675 Cr. during FY2019 and also incurred losses and bad-debts on account of non recoveries of due from receivables. The management team since then has taken steps to improve its credit policies. The subsequent decline in traded volumes has resulted in the company not being able to achieve optimal levels of volumes required for break-even. Acuité believes that, the adoption of robust credit policies, on-boarding blue-chip clients to drive volumes and overall experience of the management will help the company to grow in a sustainable manner.

Funding from marquee investors, comfortable capitalization level

The capital support from the marquee investors, like Kalaari Capital, Accel, Inventus Capital, Mr. Nandan Nilekani and IFC has resulted in healthy capitalization levels.  P2S has low gearing and has been able to raise funds from banks and financial institutions. The investors have invested since the inception of P2S and have ~78 percent stake in the company as on June-23. P2S’s networth stood at Rs. 61.45 Cr. as on Mar-23 with a gearing of 2.05 times. The support of the investors has helped the company to focus on business growth while taking corrective actions for a sustainable business model. The backing of the Investors has enable P2S to offer trade financing through their NBFC arm – Auriolus Finvest Private Limited thus enabling the Group to offer comprehensive solutions to their SME partners with respect to their raw material as well as their working capital requirements. The promoters are in discussion with existing and some new investors for another round of funding to drive growth in the volumes in its trading business and to foster its NBFC business to help build its AUM. These investments in business could help the P2S Group achieve break-even levels in medium term.  
Acuité believes that the business risk profile of P2S will benefit from the presence and support of marquee investors.
Weakness
­Moderate financial risk profile
P2S commenced its operations in 2012.  The group reported loss of Rs. 28.52 Cr. for FY2023 over an operating income of Rs.1056.68 Cr. as compared to loss of Rs. 31.34 Cr. over an operating income of Rs. 703.2 Cr. during FY2022. The company will be able to achieve break-even only once its achieves optimal levels of volumes in its trading segment and rationalize its high operating costs. Since the company is currently less dependent on funding lines from Banks & NBFC/FI for its business operations, the finance cost and debt repayment obligations remain low. For the NBFC Auriolus Finvest Private Limited the Net Interest Income (NII) improved to Rs. 4.92 Cr. as on March 31, 2023, from 1.54 Cr. as on March 31, 2022. However, as the NBFC arm grows, the company would be in requirement of funding lines which could further add to the existing stress on profitability metrics unless, the company is able to optimize its overall operating costs and scale up business volumes. Additional capital infusions from investors, could help the business to maintain lower levels of finance costs in medium term, thus enabling the company to focus its resources in driving business growth.

Competitive nature of industry and susceptibility to cyclicality nature of industry
P2S competes with various players in the organized and unorganized segments in trading industry, thus limiting the pricing power. Metals (especially steel) constitutes around 60 percent of the total NMV for P2S. The steel consumption is majorly dependent on the economic activities taking place in and around the country, any significant slowdown in this industry will impact the revenue of the P2S’s customers thus impacting P2S’s credit profile.
Rating Sensitivity
 
  • Ability to raise capital
  • Sustained scale up in business operations
  • Movement in liquidity, earnings profile and asset quality metrics 
  • Changes in Regulatory environment
 
All Covenants
Power2SME is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality among others.
 
Liquidity Position
Adequate
­The Group’s liquidity is adequate and has maintained cash and bank balance of Rs. 15.81 crore as on March 31, 2023. A major portion of P2S portfolio is against Bank Guarantee and Letter of Credit which is correspondingly discounted against the bank lines with matched tenure.
 
Outlook - Stable
Acuité believes that P2S will maintain ‘Stable’ outlook over the near to medium term on account of healthy capital position and support from marquee investors. The outlook may be revised to ‘Positive’ in case P2S demonstrates significant and sustainable growth in its scale of operations while mitigating asset quality risks in portfolio. Conversely, the outlook may be revised to ‘Negative’ in case of any challenges in scaling up operations or in case of any sharp deterioration in asset quality and profitability levels.
 
Other Factors affecting Rating
­None
 
Key Financials - Standalone / Originator
­
Particulars Unit FY23 (Actual) FY22 (Actual)
Operating Income Rs. Cr. 987.05 685.48
PAT Rs. Cr. (28.13) (28.03)
PAT Margin (%) (2.85) (4.09)
Total Debt/Tangible Worth Times 0.50 0.17
PBDIT/Interest Times (0.64) (5.91)
 
Key Financials - Consolidated
­
Particulars Unit FY23 (Actual) FY22 (Actual)
Operating Income Rs. Cr. 1056.68 703.22
PAT Rs. Cr. (28.52) (31.34)
PAT Margin (%) (2.70) (4.46)
Total Debt/Tangible Worth Times 2.05 1.05
PBDIT/Interest Times (0.25) (2.73)
 
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
• Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm
• Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Service Sector: https://www.acuite.in/view-rating-criteria-50.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
04 Nov 2022 Bills Discounting Short Term 25.00 ACUITE A3+ (Reaffirmed)
Working Capital Demand Loan Long Term 4.56 ACUITE BBB- | Negative (Reaffirmed)
Proposed Bank Facility Long Term 35.00 ACUITE BBB- | Negative (Reaffirmed)
Working Capital Demand Loan Long Term 15.00 ACUITE BBB- | Negative (Reaffirmed)
Bills Discounting Short Term 30.00 ACUITE A3+ (Reaffirmed)
Bills Discounting Short Term 15.00 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 7.50 ACUITE BBB- | Negative (Reaffirmed)
Bills Discounting Short Term 8.00 ACUITE A3+ (Reaffirmed)
24 Mar 2022 Bills Discounting Short Term 8.00 ACUITE A3+ (Assigned)
Bills Discounting Short Term 15.00 ACUITE A3+ (Assigned)
Cash Credit Long Term 7.50 ACUITE BBB- | Stable (Assigned)
Working Capital Demand Loan Long Term 4.56 ACUITE BBB- | Stable (Assigned)
Bills Discounting Short Term 25.00 ACUITE A3+ (Assigned)
Bills Discounting Short Term 30.00 ACUITE A3+ (Assigned)
Proposed Bank Facility Long Term 35.00 ACUITE BBB- | Stable (Assigned)
Working Capital Demand Loan Long Term 15.00 ACUITE BBB- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
SMC Moneywise Financial Services Pvt Ltd. Not Applicable Bills Discounting Not Applicable Not Applicable Not Applicable 9.26 Simple ACUITE A4+ | Downgraded
Credable Equentia Financial Services Pvt Ltd Not Applicable Bills Discounting Not Applicable Not Applicable Not Applicable 11.50 Simple ACUITE A4+ | Downgraded
Jiraaf: Alternative Fixed Income Investments Not Applicable Bills Discounting Not Applicable Not Applicable Not Applicable 4.77 Simple ACUITE A4+ | Downgraded
CSB Bank Limited Not Applicable Bills Discounting Not Applicable Not Applicable Not Applicable 3.73 Simple ACUITE A4+ | Downgraded
Aditya Birla Finance Limited Not Applicable Bills Discounting Not Applicable Not Applicable Not Applicable 22.51 Simple ACUITE A4+ | Downgraded
Axis Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 6.72 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 61.57 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable
Vivrit Capital Private Ltd. Not Applicable Working Capital Demand Loan (WCDL) Not available Not available Not available 5.00 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable
Northern Arc Capital (formerly IFMR Capital Not Applicable Working Capital Demand Loan (WCDL) Not available Not available Not available 15.00 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable

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