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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 210.02 | ACUITE BBB+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 89.98 | Not Applicable | Withdrawn | - |
| Non Convertible Debentures (NCD) | 105.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 100.00 | PP-MLD | ACUITE BBB+ | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 205.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 300.00 | - | - |
| Rating Rationale |
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Acuité has Reaffirmed the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) on the Rs. 105.00 Cr. Non-Convertible Debentures of Satya MicroCapital Limited (SML). The outlook is ‘Stable’. Acuité has Reaffirmed the long-term rating of ‘ACUITE PP-MLD BBB+’ (read as ACUITE Principal Protected Market Linked Debentures triple B plus) on the Rs. 100.00 Cr. principal protected market linked debentures of Satya MicroCapital Limited (SML). The outlook is ‘Stable’. Acuité has Reaffirmed and Withdrawn the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) on the Rs. 210.02 Cr. bank loan facilities of Satya MicroCapital Limited (SML). The rating has been withdrawn on account the client's request and NOC received from the banker, as per Acuite's policy of withdrawal of ratings. Acuité has Withdrawn the long term rating on the Rs 89.98 Cr Proposed Bank Loan facility of Satya MicroCapital Limited (SML). Rating Rationale The rating factors in SML's healthy capitalisation levels, resource raising ability & significant growth in AUM during FY2023. SML’s reported CAR at 19.23 percent in FY 2023 and witnessed a healthy growth in its AUM which increased to Rs 4,684 cr in FY23 from Rs 2,884 Cr in FY22. The credit profile of the company derives strength from its demonstrated ability to raise debt from diverse lenders. SML total debt increased from Rs 2,277 Cr in FY22 to Rs 3,787 Cr in FY23 resulting to increase in its gearing standing at 4.52 times. The strengths are partially offset by the moderate profitability parameters, moderate asset quality parameters and risks inherent to the nature of the business which renders the portfolios vulnerable to event risks such as natural calamities in the areas of operations. The company reported GNPA at 1.29 percent as on Mar 31, 2023 as against 3.33 percent as on March 31, 2022, the decrease in GNPA was on the account of sale of its restructured and high delinquent assets to ARC in FY23. Going forward, continued promoter support, profitability and business growth while maintaining healthy asset quality are key monitorable. |
| About the company |
| Delhi based, SML was incorporated in 1995. SML is promoted by Mr. Vivek Tiwari (MD, CEO & CIO). SML was acquired by current promoters in 2016 and subsequently registered as NBFCMFI in 2018. SML is engaged in extending microfinance loans to woman borrowers (spouses/adult sons as their co-borrowers) organized in Joint Liability Groups in rural and semirural areas. SML also extends individual micro business loans to men and women in urban areas. SML operates through a network of around 449 branches spread across 22 states on pan India basis as on Mar 31, 2023. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of SML to arrive at the rating. |
Key Rating Drivers
| Strength |
| Established presence in microfinance lending coupled with experienced management and reputed investors, healthy growth in AUM
SML, a Delhi based NBFC-MFI, commenced microfinance lending to woman borrowers organized in Joint Liability Groups in 2016. The company is also engaged in extending individual micro business loans to women entrepreneurs in rural, semi-urban and to women and men in urban areas for income-generating activities. SML has well diversified portfolio spread across 22 states. SML is managed by Mr. Vivek Tiwari (Managing Director, CEO & CIO). He has nearly two decades of experience in the microfinance space, social entrepreneurship, and impact investing. Prior to SML, Mr. Tiwari had about nine years of experience in Satin Credit Care Network limited (SCCL) as Chief Operating Officer. SML’s equity shareholding includes Mr. Tiwari share (27.28 percent), Gojo & Company Inc (62.98 percent) and remaining 9.74 percent held by other promoters and promoter’s family, friends, employees, and SATYA Employee Welfare Trust, as on Mar 31, 2023. Gojo & Company, Inc, a Tokyo based company, established in July 2014 has supported microfinance institutions in Cambodia, Sri Lanka, Myanmar and India. It has been actively involved in providing capital infusion to SML since its inception. SML’s board comprises 8 members with one Managing Director, four Independent Director, one non- executive Director and two Nominee Directors. The Board of directors has a vast industry experience. The CEO has been involved in microfinance and development sector for nearly 20 years and was associated with Satin Creditcare Network Ltd as the COO. The management has a good experience in the microfinance industry. SML’s board has representation from Gojo & Company, Inc. (Mr. Sanjay Gandhi & Mr Taejun Shin). Mr. Sanjay Gandhi, co-founder of Gojo & Company, Inc, joined the microfinance industry in 2003 and has international experience in MFI industry. Mr Taejun Shin is a Founder, Representative Director & CEO of Gojo & Company, Inc. SML continues to benefit from the expertise of their directors. The established track record of promoters in microfinance lending has supported SML’s growth strategy. The company’s Asset Under Management (AUM) has grown significantly to Rs. 4,684 Cr. as on March 31, 2023 from Rs.2,883.99 Cr. as on March 31, 2022. The off-book portfolio stood at ~Rs. 1008 Cr. as on Mar 31, 2023, vis. a. vis Rs.590 Cr. as on March 31, 2022. Healthy capital raising ability with diversified funding mix SML’s net-worth increased to Rs. 837 Cr. as on Mar 31, 2023 from Rs. 552.27 Cr. As on March 31, 2022.The company reported a capital adequacy ratio (CAR) of 19.23 percent March 31, 2023. The company’s leverage increased to 4.52 times as on March 31, 2023, from 4.13 times as on March 31, 2022. The company has a strong lender profile comprising Banks and Financial Institutions, with total debt increasing to ~Rs. 3787 Cr. outstanding as on Mar 31, 2023, as compared to Rs. 2,277 Cr. outstanding as on March 31, 2022. SML’s borrowing profile comprised Term loans, NCD’s and subordinated debt. The ability to raise debt for microfinance activities remains challenging due to a very selective and cautious approach adopted by Banks and NBFC/FIs. However, SML has demonstrated access to funding from both banks and large NBFC/FIs. Acuité believes that the company’s comfortable capitalization levels along with demonstrated resource raising ability will support its growth plans over the medium term. |
| Weakness |
| Susceptibility to risks inherent to microfinance segment
SML primarily extends unsecured loans to economically challenged borrowers who have limited ability to absorb income shocks. Since financial assistance to economic challenged borrowers is a sensitive issue, from government stand point the regulatory dispensation in respect of the policies becomes relevant. Any changes in the regulatory environment impeding the ability of entities like SML to enforce collections, etc will have an impact on its operational performance. Besides the regulatory risks, the inherent nature of the business renders the portfolios vulnerable to event risks such as natural calamities in the area of operations. Acuité believes that containing additional slippages while maintaining the growth in the loan portfolio will be crucial. Moderate profitability parameters The company saw an increase in its Net Interest Income to Rs. 276.35 crore during FY2023 (Rs. 162.22 crore for FY2022) as a result of growth on AUM. Return on Average Assets (RoAA) stood at 1.41 percent as on March 31, 2023 (1.46 percent for FY2022 annualized) the RoAA remained low due to increase in operating costs and provisions thereby impacting earnings. Operating Expense to Earning Assets (Opex) remain to be high averaging at 7 percent for the past two years. Acuite believes that going forward ability of the company to grow its loan portfolio while improving its profitability will be key monitorable. |
| ESG Factors Relevant for Rating |
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Satya MicroCapital Limited (SML) belongs to the NBFC-MFI sector which facilitates lending to the unbanked population. 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 company comprise of 4 independent directors and 2 female directors out of a total of 8 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. SML 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.
SML aims to empower women by providing micro loans to help them generate additional income opportunities, hence making an economic contribution by way of financial inclusion. It continues to work on several community development initiatives and has also developed a social performance management system to facilitate financial stability of its staff and clients. As per RBI’s guidelines on Information Technology framework for NBFCs, SML has constituted an IT strategy committee to ensure adequate control over issues like cyber security and data privacy. |
| Rating Sensitivity |
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| All Covenants |
| SML 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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SML’s liquidity buffers primarily depend on its cash inflows (collections from clients and loans from banks) vis. a vis. the cash outflows (disbursements, debt servicing commitments, operating expenses). Since SML established various collection points by collaborating with number of banks available in its operating area, this enable SML to maintain its monthly collection rate in the range of 81-95 percent. As per ALM statement as on March 31, 2023, SML has no negative cumulative mismatches in any buckets upto 2 years.
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| Outlook: Stable |
| Acuité believes that SML will maintain a 'Stable' outlook over the medium term supported by its established presence in the microfinance segment along with demonstrated ability to grow its AUM while maintaining healthy asset quality. The outlook may be revised to 'Positive' in case of higher than expected growth in AUM while maintaining key operating metrics, asset quality and liquidity. The outlook may be revised to 'Negative' in case of any headwinds faced in scaling up of operations or in case of any challenges in maintaining its asset quality, profitability metrics and capital adequacy parameters around existing levels. |
| 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 • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.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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