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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 500.00 | ACUITE A+ | Positive | Assigned | - |
| Bank Loan Ratings | 1000.00 | ACUITE A+ | Positive | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 50.00 | ACUITE A+ | Positive | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 75.00 | PP-MLD | ACUITE A+ | Positive | Reaffirmed | - |
| Commercial Paper (CP) | 100.00 | - | ACUITE A1+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 1725.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE PP-MLD A+’ (read as ACUITE Principal Protected Market Linked Debentures A plus) on the Rs. 75.00 Cr. principal protected market linked debentures of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook remains ‘Positive’.
Acuité has reaffirmed the long term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 1000.00 Cr. bank facilities of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook remains 'Positive'. Acuité has reaffirmed the long term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 50.00 Cr. Proposed Non Convertible Debentures of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL).The outlook remains 'Positive'. Acuité has assigned the long term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 500.00 Cr. bank facilities of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook is 'Positive' Acuité has reaffirmed the short term rating of ‘ACUITE A1+’ (read as ACUITE A one plus) on the Rs. 100.00 Cr. proposed commercial paper of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). Rationale for the rating The rating takes in to consideration, the increase in profitability and sustained growth in AUM, healthy growth in disbursements and stable asset quality of the company. The company reported improvement in PAT for FY23 (provisional), which stood at Rs. 59.48 Cr, as against Rs.13.96 Cr. for FY22 and Rs. 0.42 Cr in FY21.The rating also factors in PFL’s efficient risk management systems along with high level of digitation and collection processes as reflected in its overall on-time portfolio of 97.83 percent as on March 31, 2023 and overall average collection efficiency of 98.54 percent for FY23(provisional). PFL's disbursements for FY23 improved to Rs. 3141.67 Cr (provisional) from Rs. 1857 Cr. for FY2022 [FY2021: Rs.382.44 Cr.]. The rapid disbursements and branch expansion led to increase in loan portfolio which increased to Rs.2908.09 Cr. (provisional) as on March 31,2023 from Rs.1415 Cr. as on March 31, 2022 and Rs. 321.16 Cr. as on March 31, 2021. The rating continues to factor in PFL’s experienced management, healthy capital structure and support from marquee investors. PFL is wholly owned subsidiary of Consilience Capital Management; funded and backed by marquee global investors. As on March 31, 2023, the company reported networth of Rs. 1,326.18 Cr.(provisional) with Rs.1182.41 Cr. (provisional) of borrowings while its Capital Adequacy Ratio (CAR) stood at 50.43 percent (provisional). The demonstrated growth in loan portfolio and extensive experience of the management in financial services has enabled PFL recently, to raise funds from banks at competitive rates of borrowing. The rating is constrained by limited track record and low portfolio seasoning (majority of portfolio origination taken place in FY2022 & FY2023) and granularity of the portfolio. Also, the company posted higher operating expense to earning assets ratio and credit costs for FY23. The OPEX increased to 9.55 percent (provisional) for FY23 as compared to 8.47 percent for FY22. The increase in OPEX is majorly due to the in crease in staff expenses by ~76 percent and increase in other expenses by ~101 percent, from FY22, as the company expanded in FY23. The credit cost of the company increased to Rs. 41.82 Cr (provisional) for FY23 as against Rs. 10.21 Cr. for FY22. Further, The rating is constrained by the inherent risks of lending towards MSME segment. Going forward, the ability of the company sustain its growth momentum while keeping the OPEX and credit costs under control will be key credit monitorable. |
| About the company |
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Incorporated in 2019, Protium Finance Limited (PFL) erstwhile Growth Source Financial Technologies Private Limited (GFSTPL) is a Mumbai based NBFC engaged in lending secured and unsecured loans to MSME and Consumer finance segments. The company is promoted by Consilience Capital Management and led by Mr. Peeyush Misra (Partner & Director) who has over 2 decades of experience in risk management and running global businesses. PFL operates through a network of 85 branches spread across 69 districts/cities and having a presence in 17 states. PFL has a borrower base of around 2,99,148 borrowers as on March 31, 2023.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of PFL to arrive at the rating. |
Key Rating Drivers
| Strength |
| Experienced management team; demonstrated support from marquee investors
PFL extends secured & unsecured loans towards MSME segments. The company also extends loss guaranteed MSME & consumer finance loans through their channel partners. PFL is promoted by Consilience Capital Management which is backed by marquee global investors. Over the past two years of operations, PFL has received continuous support in the form of periodic capital infusion from the promoter company and are expected to support the growth plans as and when required. Consilience Capital Management have in total contributed around ~Rs. 1,255 Cr. in the form of equity and CCPS since FY2020. PFL is led by Mr. Peeyush Misra (Partner & Director) who has an experience spanning over two decades in risk management and running global businesses. He was earlier associated with Goldman Sachs (U.S.) as a Partner handling business including mortgages, asset backed securities, interest rate products amongst others. Mr. Peeyush is supported by other seasoned professionals like Mr. Amit Gupta, current CFO, who has more than two decades of experience in Indian financial services industry. PFL has also on board Mr. P R Seshadri (ex- MD & CEO Karur Vysya Bank; ex CEO BFC Bank & Citi Financial Consumer Finance) and Mr. Praveen Kumar Gupta (ex-MD Retail & Digital Banking SBI) acting as Independent Directors bringing in over 3 decades of experience in financial services industry. The management team also comprises of professionals with experience in SME, Consumer, Retail lending, Treasury & Risk Management, Fintech and Investment Banking. Acuité believes that PFL’s business and credit profile over the near term will be supported by its ability to attract funding from diversified lenders/investors and confidence imposed by the investors in the business model of the company. Healthy growth in AUM and sound asset quality PFL commenced its business in February 2020. Over the years the company has expanded its presence in 17 states with its network of 85 branches spread across 69 districts/cities. PFL has been identifying geographies suited to its loan products and expanding rapidly with opening new branches and engaging with channel partners. The company had a branch network of 85 branches as on March 31, 2023. The company’s business sourcing model is a mix of branch led origination, via DSAs and partner origination. The company disbursed loans amounting to ~Rs. 382 Cr. in FY2021 and ~Rs. 1857 Cr. in FY2022. The disbursements for FY23 improved to Rs. 3141.67 Cr.(provisional). The rapid branch expansion fuelled by disbursements has helped PFL to grow its loan portfolio to Rs. 2908.09 Cr.(provisional) as on MArch 31, 2023 from ~Rs. 1415 Cr. as on March 31, 2022, and ~Rs. 321 Cr. as on March 31, 2021. The growth in loan portfolio was primarily funded by capital funds deployed by the company but PFL do have a diverse funding mix by accessing funds from Banks and NBFC/FI’s. PFL’s healthy asset quality was marked by overall ontime portfolio at 97.83 percent and GNPA at 0.65 percent as on March 31, 2023. Overall average collection efficiency for FY23 stood at 98.54 percent . Acuité expects PFL to maintain the growth momentum in a sustainable manner while diversifying its resource mix and maintaining asset quality. |
| Weakness |
| Susceptible to inherent risks amidst relatively low seasoned portfolio
PFL commenced its lending operation in February, 2020 extending MSME loans (secured against property) having a tenure of 10 years. The company also extends unsecured MSME loans having shorter tenure upto 2 years. PFL’s shorter duration loans also includes loss protected MSME and consumer finance loans through their channel partner having a tenure ranging 1.5-2 years. The company’s loan book of Rs. 2908.09 Cr.(provisional)has grown significantly from Rs. 1415.12 Cr. as on March 31, 2022 and Rs. 321.16 Cr. as on March 31, 2021 . Due to substantial growth in loan book in the last two year, majority of the portfolio has a seasoning of around one to two year as on March 31, 2023. Around 68.6 percent of PFL’s portfolio of Rs. 2908.09 Cr. (provisional) as on March 31, 2023 accounts for MSME loans (secured against property) and ~29 percent towards unsecured MSME loans. PFL’s overall credit profile is susceptible to concentration towards MSME loans which in turn are facing their own inherent risks and challenges. Further, since MSME loans are extended to self employed individuals for business purposes, the serviceability of these loans is directly dependent on the level of economic activity in the region. The company’s operations are fairly diversified in Maharashtra with ~19 percent followed by Tamil Nadu with ~15 percent of the overall outstanding portfolio as on March 31, 2023. Occurrence of events such as slowdown in economic activity or shifting of activity to other geographies could impact the cash flows of the borrowers, thereby impacting credit profile of PFL. Relatively low seasoning of portfolio with inherent risk associated with MSME lending might result in increased asset quality pressures due to current operating environment. Acuité believes that the company’s ability to maintain its asset quality given the low seasoned loan book and increased presence in the newer geographies will remain a key rating monitorables. |
| ESG Factors Relevant for Rating |
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Protium Finance primarily lends to MSMEs. Some of the material governance issues for the financial services sector are policies and practices with regard 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, responsible financing including environmentally friendly projects and policies around data privacy. The industry, by nature has a low exposure to environmental risks.
The entity maintains adequate transparency in its business ethics practices as can be inferred from the entity’s disclosures regarding related party transactions, vigil mechanism and whistle blower policy. The board of directors of the Protium comprise of 2 independent directors out of a total of 3 directors. The audit committee formed by the entity majorly comprises of independent directors with the objective to monitor and provide an unbiased supervision of the management’s financial reporting process. Protium also maintains transparency in terms of disclosures pertaining to interest rate policy and its adherence to Fair Practice Code as disseminated by Reserve Bank of India's circular |
| Rating Sensitivity |
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| Material Covenants |
| PFL is subject to material covenants pertaining to gearing levels, GNPA and NPA levels and shareholding levels as per term sheets given by different lenders. |
| Liquidity Position |
| Adequate |
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The company reported no negative cumulative mis-matches in near to medium term as per ALM statement dated February 28, 2023. PFL’s liquidity position is adequate with cash & bank balances of ~Rs. 110 Cr. The company has FD balances to the tune of Rs.211 Cr. as on March 31, 2023 (provisional).
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| Outlook : Positive |
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Acuité believes that PFL's credit profile will have a 'Positive' outlook in the near to medium term, as it draws support from its experienced management, support from resourceful promoters’/investor base and healthy capitalisation level . The rating could be upgraded if the company is able to demonstrate seasonality and granularity in the portfolio along with a sustained growth in AUM while maintaining capital structure, asset quality and profitability metrics at healthy levels. The outlook may be revised to ‘Stable’ in case of significant deterioration in asset quality/ profitability metrics.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||||||||||||
#figures as per Acuites calculation |
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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 • Commercial Paper: https://www.acuite.in/view-rating-criteria-54.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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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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