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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 22.90 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 200.00 | Provisional | ACUITE A | Stable | Assigned | - |
| Total Outstanding | 222.90 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) on the Rs. 22.90 Cr. Non-Convertible Debenture facilities of Vedika Credit Capital Limited (VCCL). The outlook is ‘Stable’. Acuite has assigned the long term rating of 'Provisional ACUITE A' (read as Provisional ACUITE A) on the Rs 200.00 Cr. Proposed Non-Convertible Debenture facilities of Vedika Credit Capital Limited (VCCL). The outlook is ‘Stable’. Rationale for the rating The rating factors in comfortable capitalization levels supported by regular and timely equity infusion by promoter group, steady financial performance, comfortable asset quality metrics coupled with healthy provision buffers. The company's total AUM increased to Rs 1452.30 Cr. as on March 31, 2025 from Rs 1379.50 Cr. as on March 31, 2024. The company reported a PAT of Rs. 27.86 Cr. in FY2024 which improved to Rs 30.78 Cr. in FY2025. The gearing for the company has improved from 4.59x as on March 31, 2024 to 3.45x as on March 31, 2025. The provisional rating factors the credit enhancement in the form of a Debt Service Reserve Account (DSRA) mechanism along with a T-n structure on the proposed NCD facility of Rs. 200 Cr. The rating continues to factor in the long standing presence of the company in the microfinance sector adequate liquidity profile and comfortable resources raising ability. However, the rating is constrained by VCCL’s moderate scale of operations and its relatively leveraged capital structure albeit improving and asset quality levels. Going forward, VCCL’s ability to raise capital and profitably grow its loan portfolio while maintaining a conservative leverage level will be a key monitorable. The rating on the Rs. 200.00 Cr. proposed NCD for VCCL is provisional and the final rating is subject to: -Appointment of a SEBI registered Debenture Trustee -Creation of requisite DSRA -Execution of signing of Trust Deed -Receipt of the final term sheet and confirmation from trustee regarding the compliance with all the terms and condition of term sheet. |
| About the Company |
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Jharkhand based VCCL, is a Non-Banking Finance Company (NBFC) Micro Finance Institution (MFI) primarily engaged in extending Micro loans to women borrowers under the Joint Liability Group Model since 2007. The company has presence in 7 states, primarily in eastern India through a network of 192 branches as on March 31, 2025. The company was originally incorporated in 1995 by a different set of owners and subsequently, the company was taken over in 2004 by the present promoters, Mr. Ummed Jain (Chairman) and his sons, Mr. Gautam Jain and Mr. Vikram Jain. Mr. Gautam Jain (Managing Director) and Mr. Vikram Jain (Whole time Director) was initially engaged in traditional financing and gradually instrumented his aim to transform his lending operations into a recognized and regulated NBFC-MFI - VCCL. The promoters are engaged in two wheeler financing through Vedika Fincorp Limited, a group company of VCCL. |
| Unsupported Rating |
| Acuite BBB+/Stable |
| Analytical Approach: |
| Acuité has adopted a standalone approach on VCCL’s business and financial risk profile for arriving at the rating. For the proposed NCD facility, Acuite also factors in the presence of a DSRA in form of 15 percent of the issue size to be maintained in the form of cash/fixed deposit, “AA’ to‘AAA’ rated debt securities and sovereign debt securities ,in any combination, for the minimum duration covering the tenor of the NCDs along with the T structure. The differential in the ratings of regular NCD vis. a vis. the rating on the NCDs is on account of these structures. The notch-up is based on DSRA and T-n mechanism and structure being an Internal Credit Enhancement the suffix of CE is not required. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations VCCL commenced its lending operations since 2007 through a mix of Individual loans and Microloans. VCCL has a 6-member Board led by Mr. Ummed Jain (Chairman), of which three are Directors, two are independent Directors and one is nominee director who have over two decades of experience in the field of banking, law and social services. The strong managerial base has supported the growth strategy of the company. The company has increased its geographical presence from three states, i.e. Bihar, Jharkhand, and West Bengal in 2016 to seven states in 2023 by diversifying to Assam, Uttar Pradesh, Tripura and Odisha and increased network coverage from 44 branches as on March 31, 2016 to 192 branches as on March 31, 2025. The company’s AUM stood at Rs. 1452.30 Cr. as on March 31, 2025 as compared to Rs.1379.50 Cr. in FY24 and Rs.1097.12 Cr. in FY2023. The company has also leveraged its capital funds to finance its business growth. The company has strengthened its operational presence over the years by diversifying its geographical penetration along with lower dependence towards a single product. Microfinance loans are usually disbursed in clusters and are lent to marginal borrowers with limited ability to absorb income shocks. The management has judiciously improved its geographical penetration resulting in a diverse borrower base spread across various districts and geographies. For FY2025, West Bengal and Bihar contributed 32.79 percent and 24.15 percent of VCCL’s portfolio, respectively. The balance portfolio was distributed across Jharkhand, Assam, Uttar Pradesh, Odisha and Tripura. The company also has individual exposure through business loans and cross sale products in case of regulatory restrictions on lending through the normal microfinance channels. As on March 31, 2025, microloans comprised 70.51 percent of the overall AUM, with the balance being contributed by cross sale and business loans. The company plans to balance its risk metrics for business loans by migrating its existing customers from small to medium level, this change in product mix will help them in improving its fee income. The contribution of off book exposure to overall AUM has increased to 32.90 percent as on March 31, 2025 as against 32.70 percent as on March 31, 2024. Acuité believes that VCCL’s established presence and long track record of operations in the area of operations will support its credit profile. Presence of a Structured Payment Mechanism The rating factors in the Structured Payment Mechanism (SPM) put in place by VCCL to ensure timely availability of funds for servicing of debt obligations. The rating on the Rs.200 Cr. Prposed NCD considers the presence of Structured Payment Mechanism upfront DSRA has been created to the extent of 15 % of the issue size to be maintained in the form of cash/fixed deposit, “AA’ to‘AAA’ rated debt securities and sovereign debt securities, in any combination, for the minimum duration covering the tenor of the NCDs along with the T structure. The differential in the ratings of regular NCD vis. a vis. the rating on the NCDs is on account of these structures. The Debenture Trustee shall monitor the same and any shortfall persisting on T-5th day shall be met through transfer of requisite funds from the DSRA,(15% of the issue size). In case of any erosion from the DSRA, the same shall be required to be cured within 7 days (T+7). The rating is based on DSRA and T-n mechanism and structure being an Internal Credit Enhancement the suffix of CE is not required. Comfortable capitalization levels coupled with resources raising ability Capital Adequacy Ratio as on March 31, 2025 stood comfortable at 29.66 percent (Tier 1: 28.52 percent) as against 23.47 percent (Tier 1: 21.75 percent) in FY2024. The company has had an equity infusion of Rs 50.21 Cr. in FY 2025 infused by HNIs and small family offices. This infusion has improved the leverage of the company to 3.45 times in FY 2025. Further, the company expects infusion of capital in near term which is expected to aid the current capital buffers. The company has borrowings in the form of term loans and Non convertible debentures in pipeline from various PSU, MFI/NBFC and PVT Banks. The ability of the company to raise capital, to maintain its capital adequacy levels will be key monitorable. Healthy asset quality and financial performance Inspite of the ongoing challenges in the Microfinance industry, the asset quality profile of the company has been largely resilient however it was marginally impacted as seen from the Gross NPA has deteriorated to 2.06% as on March 31, 2025 from 0.73% in FY2024. Net NPA were nil on account of adequate provisions made by the company.The asset quality marked by its on time dpd portfolio stood at 94.99 percent for FY2025 as compared to 96.70 percent for FY2024 and 94.48 percent in FY2023 (92.22 percent in FY2022). The asset quality of the company has seen further improvement, where the company reported a GNPA of 1.82% and NNPA of 0.0% for Q1FY26. |
| Weaknesses |
| Leveraged capital structure VCCL engaged in unsecured lending to marginal income borrowers with limited ability to absorb income shocks. The company extends micro credit through the Joint Liability Group (JLG) model. It has over the years established a diverse resource base comprising of 33 lenders. As on March 31, 2025 the company had a net worth of Rs. 284.43 Cr. as compared to Rs. 205.30 Cr. as on March 31, 2024. The borrowings stood at Rs. 980.03 Cr. in FY 2025 as against Rs. 942.87 Cr.,improving the company’s gearing level to 3.45 times as on March 31, 2025 as against 4.59 times as on March 31, 2024 however this improvement in the leverage is due to relative reduction in total debt in FY2025 due to the decreased exposure of lenders in the MFI segment. The debt comprises of Term loans from Banks/FIs, NCDs and subordinated debt from FI’s. Acuité believes the company’s ability to manage its gearing levels will be a key monitorable in the near future. |
| Assessment of Adequacy of Credit Enhancement under various scenarios including stress scenarios (applicable for ratings factoring specified support considerations with or without the “CE” suffix) |
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Acuite takes into consideration the Structured Payment Mechanism (SPM) put in place by VCCL to ensure timely availability of funds for servicing of debt obligations. As per the structure, the Debenture Trustee shall monitor the same and any shortfall persisting on T-5th day shall be met through transfer of requisite funds from the DSRA. In case of any erosion from the DSRA, the same shall be required to be cured within 7 days (T+7). Stress case Scenario Acuite has stressed the projected cash flows against maturing repayment obligations and found that even in a stressed scenario, VCCL would be able to timely meet its scheduled repayment obligations. Further, Acuite believes that given adequacy of the structure and unconditional, irrevocable and legal enforceability, VCCL will be able to service its debt on time, even in a stress scenario. |
| ESG Factors Relevant for Rating |
| Vedika Credit Capital Limited (VCCL) belongs to the NBFC sector which complements bank 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. In terms of its business ethics, performance, the entity has maintained adequate disclosure regarding its Grievance Redressal, related party compliance and fair practice code. The board of directors of the company comprise of 2 independent directors out of a total of 6 directors with no female director. The entity has an audit committee, nomination and renumeration committee and corporate social responsibility committee. As per Reserve Bank of India (RBI) guidelines, the NBFC has an IT policy to oversee its cybersecurity. VCCL has also maintained disclosures regarding renumeration of its directors and key managerial personnel (KMP). VCCL aims to empower entrepreneurs that have limited access to the banking sector in India, hence making an economic contribution by way of financial inclusion. It continues to work on several community development initiatives through its corporate social responsibility projects. |
| Rating Sensitivity |
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| All Covenants |
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Financial Covenants Financial ratio covenants to be maintained by the Borrower, including, inter alia: a) ratio of Total Liabilities to Total Equity not to exceed 6x. b) Capital Adequacy Ratio to exceed 20% Return on Assets to exceed 1% d) Portfolio at Risk greater than 30 days (PAR>30) plus Restructured Loans does exceed 5% e) Write-off Ratio does not exceed 2.0% until March 2022 and 1.5% thereafter Reporting Covenants The Borrower shall submit to the Lender the reports identified in the transaction documents until the Loan is fully repaid. |
| Liquidity Position |
| Adequate |
| VCCL’s liquidity profile is adequate, with positive cumulative mismatches across most of the buckets as per the ALM statement as of March 31, 2025. Furthermore, the company has cash and cash equivalents of Rs. 149.81 Cr. as on March 31, 2025. |
| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
** Total income equals to Net interest income plus other income |
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| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
Supplementary disclosures for Provisional Ratings
| Risks associated with the provisional nature of the credit rating |
| In case there are material changes in the terms of the transaction after the initial assignment of the provisional rating and post the completion of the issuance (corresponding to the part that has been issued). Acuite will withdraw the existing provisional rating and concurrently, assign a fresh final rating in the same press release, basis the revised terms of the transaction. |
| Rating that would have been assigned in absence of the pending steps/ documentation |
| ACUITE BBB+/Stable |
| Timeline for conversion to Final Rating for a debt instrument proposed to be issued |
| The provisional rating shall be converted into a final rating within 90 days from the date of issuance of the proposed debt instrument. Under no circumstance shall the provisional rating continue upon the expiry of 180 days from the date of issuance of the proposed debt instrument. |
| Any other information |
| None |
| Applicable Criteria |
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• Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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