Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 20.00 ACUITE BB+ | Stable | Upgraded -
Non Convertible Debentures (NCD) 7.50 ACUITE BB+ | Stable | Upgraded -
Total Outstanding Quantum (Rs. Cr) 27.50 - -
 
Rating Rationale
Acuité has upgraded its long-term rating to ‘ACUITE BB+’ (read as ACUITE double B plus) from ACUITE BB (Read as ACUITE Double B) on the Rs 20.00 Cr. bank facilities (including the proposed facilities) of Seeds FIincap Private Limited (SFPL). The outlook is 'stable'.

Acuité has upgraded the long-term rating to ‘ACUITE BB+’ (read as ACUITE double B plus) from ACUITE BB (Read as ACUITE Double B) on the Rs 7.50 Cr. Proposed Non Convertible Debentures of Seeds FIincap Private Limited (SFPL). The outlook is 'stable'.

Rationale for upgrading the rating
The rating considers the company’s experienced management team, sound asset quality, and significant growth in AUM levels in FY23. The company’s AUM grew to Rs. 208.15 Cr as on March 31, 2023, compared to Rs. 65.26 Cr as on March 31, 2022. It has been increased due to the healthy disbursement levels at Rs 213.27 Crore in FY2023 compared to Rs 70.44 Crore in FY2022. The rating further factors the comfortable asset quality indicators - marked by on-time portfolio of 99.8% percent as on March 31,2023. Reportedly, the company's GNPA and NNPA are nil as on March 31,2023.

The rating, however, continues to remain constrained by SFPL’s weak earnings profile, modest networth base, and its nascent stage of operation. The company's profitability remained restrained with losses of Rs (3.43) Crore for FY23 and Rs (6.64) Crore in FY22. These losses are on account of the high operating expenses pertaining to increase in branch networks. The rating also factors SFPL’s geographically concentrated portfolio due to its limited track record of operations. (Uttar Pradesh contributing 54% of total AUM as on March 31, 2023).
Acuite believes that the company’s ability to timely infuse capital, improved networth base, and improvement in the profitability metrics, while keeping the momentum in growth of AUM, and disbursements would be a key rating monitorable.

About the company
Incorporated in 2019, Seeds Fincap Private Limited (SFPL) is a RBI registered non- deposit taking NBFC with its headquarters in Gurugram (Delhi). The company is currently Promoted by Mr Subhash Chandra Acharya as the  CEO and Managing Director, and Mr Avishek Sarkar as a whole-time Director. They are engaged in providing unsecured loans to people/enterprises living in Tier II, III & IV Cities.  It commenced its operations in February 2021, and currently operating in Haryana, Rajasthan, Uttar Pradesh, Bihar, and Uttarakhand with 54 branches as recorded on March 31,2023
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profile of SEEDS FINCAP PRIVATE LIMITED to arrive at the rating.
 

Key Rating Drivers

Strength
Experienced Management :
SFPL is engaged in extending unsecured loans to people and enterprises in Tier II, III and IV cities. It operates in five states with branch networks of 54 branches. The company is headed by Mr Subhash Chandra Acharya as the Managing Director-CEO, Mr Avishek Sarkar as the Whole Time Director, and Mr Sudhindra Kumar Sharma as the Executive director, supported by the seasoned professionals for the daily operations. The management has an extensive experience of over a decade in the industry. 
Acuité believes that company’s growth prospects will be supported by the promoter’s experience in this industry

Healthy AUM growth while maintaining Asset Quality;
The company’s loan portfolio significantly registered a growth Rs. 208.15 Cr on March 31, 2023, compared to Rs. 65.26 Cr as on March 31, 2022. The company extends loans to entrepreneurs, with ticket sizes ranging between Rs 50,000 to 2,50,000. The average tenure of these unsecured loans range between 19 to 24 months. SFPL has demonstrated sound asset quality marked by on- time portfolio of 99.8 percent as on March 31,2023.
Acuité believes that SFPL’s ability sustain the growth in its loan book, while maintaining sound asset quality level in the near to the medium term will be key rating monitorable.
­
Weakness
Subdued profitability metrics:
SFPL was incorporated in 2019, and it is operating from Delhi since February 2021. The company is spread across 5 states, with the major exposure in state of Uttar Pradesh (54% of the portfolio o/s). The company expanded their branch network from 24 in March 31, 2022, to 54 in March 31, 2023, as to improve it's borrower base. This expansion resulted in high operating expenses primarily driven by staff expenses leading to subdued profitability metrics. The company reported losses to the tune of Rs 3.43 Cr in FY23 against the losses of Rs 6.64 Cr in FY22. SFPL’s ability to scale up its operations while maintaining its profitability metrics would be a key rating monitorable.
 
Modest capital structure:
SFPL offers loans for Trading, Agriculture & Dairy, Manufacturing & Production, Services and Consumer loan & MFIs which account for approximately 56.97%, 9.06%, 9.92%, 5.32% , 18.73% respectively of the portfolio.   The company’s capital structure is marked by Networth of Rs 37.5 Cr. as on March 31, 2023 and total debt of Rs Cr. 132.04  resulting in debt/equity ratio of 3.52 times.  There has been capital infusion of Rs 17.7 Cr during FY2023 resulting in networth of Rs 37.5 Crore in FY2023 from Rs 23.18 Cr in FY2022

 

­
Rating Sensitivity
  • ­Movement in asset quality metrics.
  • Movement  in the profitability metrics.
  • Movement in liquidity buffers.
  • Changes in regulatory environment.
 
Material Covenants
­SFPL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality, among others.
 
Liquidity Position
Adequate
­As per ALM statement as on March 31, 2023, SFPL has no negative cumulative mismatches in any buckets upto 1 years. As per ALM Statement dated March 31, 2023, around Rs. 80.78 Cr. ~61 percent of borrowings mature till 1 years against Rs. 82.03 Cr. ~55 percent of total advances in same period. SFPL’s is able to maintain its monthly collection efficiency at the range of 99.79 percent. SFPl’s maintained cash and bank balances of ~Rs.7.84. Acuité believes that the SFPL’s has adequate liquidity to meet its debt obligation in near to medium term.
 
Outlook: Stable
­Acuité believes that SFPL will maintain ‘Stable’ outlook over the near to medium term owing to the experience of promoters. The outlook may be revised to ‘Positive’ in case SFPL 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 faced in scaling up operations, resource raising ability and in case the company faces higher than expected asset quality pressures or deterioration in profitability parameters.
 
Other Factors affecting Rating
­None
 
Key Financials - Standalone / Originator
Particulars Unit FY23 (Provisional) FY22 (Actual)
Total Assets Rs. Cr. 176.68 78.84
Total Income* Rs. Cr. 19.88 3.76
PAT Rs. Cr. -3.43 -6.64
Net Worth Rs. Cr. 37.56 23.18
Return on Average Assets (RoAA) (%) -2.68 -16.38
Return on Average Net Worth (RoNW) (%) -11.29 -52.5
Total Debt/Tangible Net worth (Geraing) Times 3.52 2.32
Gross NPA (%) 0 0
Net NPA (%) 0 0

­ Total income equals to Net Interest Income plus other income.
 
 
Status of non-cooperation with previous CRA (if applicable):
None­
 
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
• 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
04 Oct 2022 Proposed Non Convertible Debentures Long Term 7.50 ACUITE BB | Stable (Assigned)
Term Loan Long Term 3.00 ACUITE BB | Stable (Reaffirmed)
Proposed Bank Facility Long Term 17.00 ACUITE BB | Stable (Reaffirmed)
29 Sep 2022 Proposed Bank Facility Long Term 17.00 ACUITE BB | Stable (Assigned)
Term Loan Long Term 3.00 ACUITE BB | Stable (Assigned)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
RBL Bank Not Applicable Cash Credit 12 Aug 2022 13.65 12 Aug 2023 1.00 Simple ACUITE BB+ | Stable | Upgraded
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 8.75 Simple ACUITE BB+ | Stable | Upgraded
Not Applicable Not Applicable Proposed Secured Non-Convertible Debentures Not Applicable Not Applicable Not Applicable 7.50 Simple ACUITE BB+ | Stable | Upgraded
RBL Bank Not Applicable Term Loan 12 Aug 2022 13 12 Nov 2023 0.93 Simple ACUITE BB+ | Stable | Upgraded
A U Small Finance Bank Not Applicable Term Loan 19 Jan 2023 16 19 Jul 2024 4.44 Simple ACUITE BB+ | Stable | Upgraded
Shivalik Small Finance Bank Not Applicable Term Loan 24 Mar 2023 14 24 Apr 2024 3.00 Simple ACUITE BB+ | Stable | Upgraded
DCB Bank Limited Not Applicable Term Loan 30 May 2022 14 31 Jul 2024 1.88 Simple ACUITE BB+ | Stable | Upgraded
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