By Tricitynews Reporter
Chandigarh
20th September:- Leading
credit rating agency CRISIL has assigned its “A+/Stable” credit rating
for Asirvad Microfinance Ltd, said to be the highest current rating given by
CRISIL to a microfinance company. The revised rating is applicable to the
long-term bank facility and non-convertible debentures of the company. CRISIL has also assigned its 'CRISIL A1+' rating to the commercial paper programme of Asirvad.
The
rating reflects the management and financial support that Asirvad derives from
its parent Manappuram Finance Ltd (Manappuram Finance; rated 'CRISIL
AA-/Stable/CRISIL A1+'). The rating also factors in adequate capitalisation and
healthy profitability. These rating strengths are partially offset by risks
relating to geographical concentration and rapid growth in portfolio, and risks
arising from potential regulatory and legislative changes in the microfinance
sector.
According
to Crisil, Asirvad is adequately capitalised for its expected scale of
business. Net worth and gearing (including securitisation as part of debt) were
Rs 2.3 billion and 3.9 times as on March 31, 2016. The net worth has increased
from Rs 1.1 billion a year earlier, backed primarily by infusion of capital of
around Rs 1 billion by Manappuram Finance during the year, in addition to
higher accrual. Additional infusions of equity are expected to support capital
adequacy over the medium term. The gearing, adjusted for off-balance sheet portfolio,
should remain around 6 times. Profitability
is expected to remain healthy, underpinned by ramp-up in scale of operations
and fee-based income.
The rating on Asirvad's debt centrally factors in
expectation of support from the parent. The microfinance business is
strategically important to the Manappuram group, and is its largest business
after gold loans. The business is scalable, and has been profitable and,
therefore, should be a key growth driver for the group over the medium term.
Manappuram Finance holds 90% of the equity in Asirvad; has infused growth
capital and will infuse capital as and when required. In addition, V.P.
Nandakumar, MD & CEO, and two other directors of Manappuram Finance are on
the board of Asirvad. Given Manappuram Finance's strong moral obligation to
support Asirvad, the parent's financial and managerial support is expected to
continue over the medium term.