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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 20.00 | ACUITE A- | CE | Stable | Assigned | Provisional To Final | - |
| Bank Loan Ratings | 15.00 | ACUITE A- | CE | Stable | Reaffirmed | - |
| Bank Loan Ratings | 150.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 160.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Commercial Paper (CP) | 25.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 370.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has converted from provisional to final the long-term rating of ‘ACUITE A- (CE)’ (read as ACUITE A minus (Credit Enhancement)) on the Rs. 20.00 Cr. partially credit enhanced term loan facility of of Si Creva Capital Services Private Limited (SCCSPL). The outlook is ‘Stable’.
Acuité has reaffirmed the long-term rating of ‘ACUITE A- (CE)’ (read as ACUITE A minus (Credit Enhancement)) on the Rs.15.00 Cr. partially credit enhanced term loan facility of of Si Creva Capital Services Private Limited (SCCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs. 160.00 crore Non-Convertible Debentures of Si Creva Capital Services Private Limited (SCCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs. 150.00 crore bank facilities of Si Creva Capital Services Private Limited (SCCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs. 25.00 crore Proposed Commercial Paper of Si Creva Capital Services Private Limited (SCCSPL). Rationale for the rating The rating takes into account comfortable capital structure at consolidated levels (OnEMI Technology Solutions Private Limited- OnEMI is the holding company) as a result of regular capital infusion from investors. So far, OnEMI has raised roughly Rs.270 crore from nvestors which has been mainly down streamed into SCCSPL. As on March 31, 2022, OnEMI reported Networth and gearing of Rs. 243.44 crore and 0.57 times, respectively. Capital Adequacy ratio of SCCSPL stood at 56.32 percent as on March 2022 as compared to 79.26 percent in FY2021 and 51.84 percent in FY2020. The ratings also take into consideration experienced management of the company, scalable business model with technology driven digital lending platform and improved business and financial performance. Post Covid-19 led pandemic, thecompany had realigned its business strategy towards higher yielding, low-ticket size and small duration lending which has led to growth in disbursements in the recent quarters. Disbursements during FY2022 stood at Rs. 3669.36 crore as against Rs. 957.21 crore in FY2021. Consequently, Profit before Tax (PBT) for FY2022 on consolidated level stood at Rs. 55.14 crore (provisional) as against losses of Rs.58.45 during FY21. SCCSPL has stringent risk management policy supported by rigorous write-offs and provisioning norms. These strengths are however partially offset by muted profitability indicators on account of high operating costs and elevated credit costs associated with the business. While the company has reported recent improvement in profitability on both standalone and consolidated level, the same has been on account of improved business volumes and the resultant rise in interest and fee incomes. The ratings are also constrained on account of SCCSPL’s subdued asset quality with on time portfolio being at 69.75 percent as on March 31, 2022 as against 78.89 percent in FY2021 and 85.02 percent in FY2020. While Acuite takes cognizance of the company’s stringent provision and write-offs policy, asset quality will continue to be a key monitorable given the unsecured nature of portfolio. Additionally, Acuité believes the ability of SCCSPL to profitably scale up its portfolio while maintaining robustness of its technology platform given the evolving nature of FinTech model is also a monitorable. For the Rs. 15.00 Cr. transaction: The Rs 15.00 Cr transaction has a PCE in the form of unconditional, irrevocable, payable on demand guarantee by Northern Arc covering 15 percent of the issue size of debentures. The level of guarantee as a percentage of the aggregate outstanding principal of the debentures is, however, capped at 25 percent. If due to the amortization of the debentures, the credit enhancement percent exceeds 25 percent of the aggregate outstanding principal of the debentures, the Guarantee Cap shall be reduced to 25 percent of the aggregate outstanding principal of the debentures (Revised Guarantee Cap). For the Rs. 20.00 Cr. transaction: The Rs 20.00 Cr transaction has a PCE in the form of unconditional, irrevocable, payable on demand guarantee by Northern Arc covering 15 percent of the issue size of debentures. The level of guarantee as a percentage of the aggregate outstanding principal of the debentures is, however, capped at 25 percent. If due to the amortization of the debentures, the credit enhancement percent exceeds 25 percent of the aggregate outstanding principal of the debentures, the Guarantee Cap shall be reduced to 25 percent of the aggregate outstanding principal of the debentures (Revised Guarantee Cap). The final rating is assigned based on the fulfilment of the structure, terms and covenants detailed in the executed trust deed, deed of guarantee, legal opinion, debenture trust agreement, deed of hypothecation and other documents relevant to the transaction. |
| About the Company |
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Incorporated on 8th July 2015, SiCreva is a wholly owned subsidiary of OnEMI Technology Solutions Pvt. Ltd (OnEMI) and headquartered in Mumbai. The company received certificate of registration from RBI on 8th September 2016 to carry on the business of Non-Banking Financial Institution (NBFC) without accepting public deposits. The company was founded by Mr. Ranvir Singh and Mr. Krishnan Vishwanathan, former McKinsey consultants and alumni of IIM Bangalore and Yale respectively. Si Creva majorly operates in the state of Maharashtra with ~30 percent loan portfolio outstanding as on March 31, 2022. SCCSPL has a branch network in 15 states with total employees of 369 as on March 31, 2022. Loans have a tenure ranging from 6 to 24 months for Purchase Finance and 2-24 months for Personal Loans.
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| About the Group |
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Si Creva outsources certain activities to OnEMI which is the FinTech arm having 'Kissht' as the brand name. Kissht is a one-of-a-kind-credit-led digital payment solutions platform by OnEMI that provides consumers seamless and easy access to credit for purchases across online and offline channels. It uses proprietary algorithms to assess the creditworthiness of a potential buyer in a real-time/instant process to enable the on-the-spot purchase. The Kissht platform is a fully digitized and automated fulfilment platform that supports all types of credit led purchases – an EMI-based loan, a debit-card EMI solution and credit-card EMI solutions. The platform is fully integrated with credit bureaus, Aadhaar, UPI and NSDL. The company's proprietary credit algorithm is driven by 855 bureau variables, 600+ social media variables, 75+ fraud analytics trigger and 100+ digital footprint variables.
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| About the Guarantor |
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Northern Arc, previously known as IFMR Capital Finance Ltd., is a Non-Deposit taking NonBanking Financial Company (ND-NBFC) incorporated in 1989. It is involved in the placement (arranging funding for its clients via loan syndication, securitisation and assignment among others) and lending business. The company acts as a link between mainstream capital markets investors and highquality last mile lending institutions and businesses. The company’s business is categorized as finance sector exposure, i.e., microfinance, affordable housing finance, commercial vehicle finance, consumer finance, agri-finance and small business loans, and non-finance sector exposure, i.e., mid-market finance and corporates.
Northern Arc reported Assets Under Management (AUM) of Rs. 6874 Cr. as on March 31, 2022 as against Rs. 5,220.87 Cr. as on March 31, 2021. Northern Arc’s asset quality improved with GNPA (90+dpd) at 0.51% as on March 31, 2022 as against 2.23% as on March 31, 2021. The company’s Profit After Tax (PAT) stood at Rs. 163.73 Cr for the period ending FY2022 (Rs. 67.51 Cr as of FY2021). The company’s debt/equity ratio was 2.53 times as on March 31, 2021 as compared to 1.96 times as on March 31, 2020. However, the debt/equity ratio increased to 3.50 times as on March 31, 2022. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profile of OnEMI Technology Solutions Private Limited (OnEMI), the parent company of Si Creva Capital Services Private Limited. This approach is in the view of the equity funds raised by the Holding Company OnEMI and subsequently down streamed to its operating Subsidiary (Si Creva). Acuité has further factored in the benefits arising from the structure while arriving at the final rating. This approach is also in view of common management besides financial and technology support from OnEMI to Si Creva.
Standalone rating considered for the PCE transactions: ACUITE BBB/Stable |
Key Rating Drivers
| Strength |
| Strength of underlying structure
The Rs 15.00 Cr. and Rs. 20.00 Cr. transactions have a PCE in the form of unconditional, irrevocable, payable on demand guarantee by Northern Arc covering 15 percent of the issue size of debentures. The level of guarantee as a percentage of the aggregate outstanding principal of the debentures is, however, capped at 25 percent. If due to the amortization of the debentures, the credit enhancement percent exceeds 25 percent of the aggregate outstanding principal of the debentures, the Guarantee Cap shall be reduced to 25 percent of the aggregate outstanding principal of the debentures (Revised Guarantee Cap). Si Creva shall make payments of interest and principal amounts due along with all other obligations (if any) under the Transaction Document on T-5 business days. In the event of failure of the Issuer to comply, on T-4 Business Days, the Trustee shall invoke the PCE and the credit enhancement shall be dipped on T-1 Business days. The Debentures shall be secured by way of a first ranking, exclusive and continuing charge on identified receivables. The Hypothecated Receivables shall at all times be equal to the value of 1.1 times the outstanding amounts of the facility. In case of Issuer rating (as per Rating Agency’s view) downgrade to below BB+, the Borrower will ensure that the percentage of outstanding principal value of PAR > 0 loans in the hypothecated pool does not exceed 10 percent of the outstanding principal value of the hypothecated pool. The Debentures shall be secured by way of a first ranking, exclusive and continuing charge on identified receivables. The Hypothecated Receivables shall at all times be equal to the value of 1.1 times the outstanding amounts of the facility. In case of Issuer rating (as per Rating Agency’s view) downgrade to below BB+, the Borrower will ensure that the percentage of outstanding principal value of PAR > 0 loans in the hypothecated pool does not exceed 10 percent of the outstanding principal value of the hypothecated pool. Experienced management Si Creva is a registered Non- Banking Financial Company (NBFC) and wholly owned subsidiary of OnEMI. The company is a part of the evolving fin-tech industry in India and commenced operations in 2016 with focus on providing unsecured credit products to individuals. It operates in the retail space and provides consumer durable (purchase finance) as well as personal loans catered to the market through online as well as offline model. The company provides loans through app called Kissht. The company’s board consists of eight directors, of which two are founder members, two are independent directors and four are representatives from the investors. Mr. Krishnan Vishwanathan is the founder and CEO of Kissht and leads the overall strategic way for the company while directly overseeing critical go-to-market functions. At McKinsey & Company, Mr. Krishnan has served over 15 banks and NBFCs on a variety of topics. Mr. Ranvir Singh is one of the Co-founders of Si Creva having more than 13 years of experience serving financial institutions. He is an expert in retail credit technology, risk. The founders are supported by experienced senior management team heading different verticals with adequate and relevant experience in their respective fields. Mr. Karan Mehta is the CTO and has 7 years of experience in big data, mobile and web delivery services. He previously worked at Citadel as the Tech program lead. Apart from this, there are three key management personnel heading Retail, Risk management and Treasury department. Acuité believes the business risk profile of the company will benefit from the support from the management. Comfortable capitalization levels coupled with demonstrated fund raising ability OnEMI Technology Solutions Private Limited has received steady capital infusion at regular intervals. The same has been down streamed into Si Creva in the form of equity and preference capital. The company’s parent company, OnEMI Technology Solutions Private Limited, is backed by marquee investors VentureEast and has raised Rs. 270 crore through multiple rounds of equity till date. This has resulted into comfortable capitalisation levels, where CRAR stood at 56.32 percent as on March 2022 as compared to 79.26 percent in FY2021 and 51.84 percent in FY2020. However, gearing is comfortable at both standalone and consolidated level which stood at 0.78x and 0.57x, respectively in FY2022. Acuité expects Si Creva’s capital structure and business to continue to benefit from fund raising ability from investors. Improvement in profitability on account of change in business mix & volumes Si Creva operates in the retail space and provides consumer durable (purchase finance) as well as personal loans. Earlier, the company catered to the market through online as well as offline model. However, the tie-ups with physical merchants had been impacted during Covid-19 as their businesses suffered. This led to Si Creva being largely operational only in the personal loans segment and reduction in Purchase Finance loans. As on March 22, about ~97% of the portfolio is from personal loan as compared to ~64% as on March 2021 and ~33% as on March 2020. PAT stood at Rs. 62.61 in FY22 as against Rs. -58.45 crore in FY21 at consolidated level. Considering the impact of Covid-19, the company had undertaken new product construct – tenure of less than 3 months and a changed pricing policy – lower interest rates with higher processing fee of 5-6%, hiked yields from 25% to 35% which will help Si Creva to absorb higher operating costs. This shift in business model has resulted into higher fee income leading to interest rate spread of 30-35 percent. Disbursements during FY22 stood at Rs. 3669.36 crore as against Rs. 957.21 crore in FY2021. Higher disbursals have led to improvement in AUM resulting into Rs. 378.01 crore as on March 31, 2022 as compared to Rs. 241.46 crore in FY21. The business turnaround with strategic reorientation towards higher yielding, low-ticket size and small duration lending along with higher disbursements have led to increased profitability. Acuité believes that the ability of the company to sustain profitability will depend on its operational efficiencies and ability to maintain growth momentum. |
| Weakness |
| Moderate asset quality; Stringent write-offs and provisioning policy
The portfolio had declined by nearly Rs.183.55 Cr. during FY2021, mainly led by reduction in Purchase Finance loan by Rs. 196.44 crore. The loan portfolio outstanding as on March 31, 2021 stood at Rs. 241.6 crore as against Rs. 425.15 crore as on March 31, 2020. However, the portfolio recovered to Rs. 378.01 Cr. as on March 31, 2022. Asset quality is moderated with on time being at ~69.75 percent as on March 31, 2022 against ~78.89 percent in FY2021 and ~85.02 percent in FY2020. The proportion of assets in 30-90 dpd bucket had sharply increased in 9MFY22 to 16.56 percent from 3.98 percent in FY21, which marginally recovered to 13.28 percent as on March 31, 2022. However, the proportion of asset in 180+ dpd bucket was nil in FY22. This on account of change in portfolio construct in favour of short term and low ticket size loans. Gross NPA has improved from 5.52 percent as on December 2021 to 2.87 percent as on March 2022. Net NPAs are nil on account of provisions and write-offs made by the company. As per the management of the company, write off policy has changed to 90+ dpd, earlier it used to happen at 120+ dpd. Along with this, the company follows stringent provisioning norms, where it has 100 percent provisioning for 90+ dpd. Going forward, asset quality metrics will remain critical parameters. Evolving nature of FinTech business model Given that the digital lending particularly in B2C segment is evolving and company is still in the early stage of operations, it is yet to be seen how the companies achieve the scalability and sustained profitability. Si Creva’s lending process is entirely digital monitored through algorithms with minimal manual intervention. The experience of the management and the strong board composition has successfully led the group to become PAT positive in FY2022, owing to the Covid-19 pandemic induced stress, there were slippages in the asset quality and operating and credit costs were high in FY21, leading to losses for the group in FY2021. Hence the sustained performance and stability of the business model remains to be seen. Technology and regulatory risks Given that innovative technology is the backbone of FinTech business model, the company is exposed to technology risks encompassing data security, privacy and technology failure. Since all the business functions including data storage, disbursals and collections mechanism is done digitally, any breach shall expose the company to cyber events and liabilities arising thereon. Acuité understands that the company is frequently conducting tech audit to keep a track of any potential risk. The ability of the self-learning algorithms to underwrite better quality assets is still evolving and remains to be proved at the technology front in order to scale up the business operations. Additionally, the company is also exposed to evolving regulatory developments given that the FinTech business model is at nascent stage. |
| Assessment of Adequacy of Credit Enhancement |
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Si Creva has moderate experience in the unsecured personal loan and purchase finance loans and its capital position has been bolstered by capital infusions. Thus, even after considering risks such as possible asset quality deterioration, Acuité believes that the credit enhancement will stand adequate in all scenarios and in the event of any requirement, Northern Arc will provide the necessary support.
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| ESG Factors Relevant for Rating |
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SCCSPL belongs to the NBFC sector which continues to complement the efforts of banks in enhancing small ticket retail lending in India. 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 has made adequate disclosures regarding its policies on related party transactions. It also adheres to Reserve Bank of India’s Fair Practices Code and has the necessary interest rate and grievance redressal policies. OnEMI Technology Solutions Private Limited’s board of directors consist of 5 nominee directors out of a total of 7 directors. The company does not, however have a woman director on its board. SCCSPL provides personal loan, purchase finance loans. They aim to make credit highly accessible to the salaried and self-employed segment through adoption of technology. SCCSPL supports community development through CSR projects mainly aimed at promotion of education, eradication of hunger, environmental sustainability, protection of national heritage and culture among other causes.
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| Rating Sensitivity |
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| Material Covenants |
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Si Creva Capital Services Private Limited is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality among others.
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| Liquidity Position |
| Adequate |
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Si Creva’s liquidity profile is adequate, with positive cumulative mismatches across all the buckets as per the ALM statement as of March 31, 2022. As on March 2022, Si Creva has maintained cash and cash equivalents of Rs. ~125 Crore. Its collection efficiency has been in the range of 80-90% over the last 6 months ending March 22. Collection Efficiency for the month of March 22 stood at 82.46 percent. Si Creva’s change in the business model with shift towards shorter tenure of loans will provide further support to the liquidity.
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| Outlook : Stable |
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Acuité believes that Si Creva will maintain ‘Stable’ outlook over the near to medium term on account of support healthy capital position and support from investors. The outlook may be revised to ‘Positive’ in case Si Creva 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.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals Net Interest Income plus other income.
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| Key Financials (Consolidated) | ||||||||||||||||||||||||||||||||||||||||
*Total income equals Net Interest Income plus other income.
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| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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| 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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