| Adani Housing Finance Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA-/Stable/CRISIL A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+’ ratings on the debt instruments and bank facilities of Adani Housing Finance Private Limited (Adani Housing; part of the Adani group).
The ratings on the debt instruments and bank loan facilities of Adani Housing continue to reflect strong support from the Adani group, both on an ongoing basis and in case of distress. This reflects the strategic importance of Adani Housing, a part of the financial services business of the group, and commitment of the group to support the company given its majority shareholding and common brand. The rating also factors in the financial services businesses’ (consolidated for Adani Capital Pvt Ltd (Adani Capital) and Adani Housing) comfortable capitalisation, improvement in earnings profile and experienced management. These strengths are partially offset by small scale of operations. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the financial services business of the Adani group, which includes Adani Capital and Adani Housing, as there are strong linkages in terms of operations, management, infrastructure, and treasury. The ratings also factor in support from the Adani group. The group should support these entities, in business as usual and in distress situations, as and when required, considering the strategic importance of the financial services business to the group and high commitment owing to majority shareholding and shared brand.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Expectation of strong support from the Adani group The financial services businesses are an important avenue for the Adani group. The group, through its step-down subsidiaries, has 90% stake in both Adani Capital and Adani Housing and is expected to maintain this at a minimum 75%. The group is one of the large conglomerates in India and has identified financial services as a key focus growth area for the long term. Moreover, Adani Capital's MSME lending business is expected to also tap into suitable business opportunities in the ecosystem of the Adani group entities
The financial services businesses will also benefit from the shared brand in raising resources and building relationship with banks, other lenders and investors. A common brand implies a strong commitment on the group to support the financial services businesses both, in business as usual and in distress situations, as and when required. There is also an oversight of operations by the group by representation on the board.
The Adani group is a diversified conglomerate and one of India’s largest infrastructure and utilities platforms whose profile is supported by market leadership in the transport & logistics and energy & utilities segments. It has strong operating efficiencies and execution track record in most of its businesses.
The rating is sensitive to the credit risk profile of the Adani group. Any material increase in the group’s consolidated leverage levels or significant enhancement in debt in the promoter holding companies vis-a-vis the market value of their investments in the operating companies will remain key monitorables.
Additionally, CRISIL Ratings has taken note of report (dated May 6, 2023) submitted by Expert Committee constituted by Supreme Court of India and movement of SEBI’s investigation with regards to minimum public shareholding, disclosure of transactions with related parties in accordance with law and stock price manipulations.
Any adverse regulatory/ government action in the wake of earlier published Hindenburg research report, emerging issues around corporate governance, ongoing investigations ordered by Supreme Court of India or a decline in group’s resource raising capabilities from banks or capital markets will be key monitorable.
Comfortable capitalisation Adani Housing and Adani Capital have comfortable capitalisation as reflected in consolidated networth of Rs 777 crore with a consolidated on-book gearing of 3.3 times (3.6 times for Adani Capital and 2.2 times for Adani Housing). CRISIL Ratings-adjusted gearing[1] on a consolidated basis was 4.1 times as on March 31, 2023 (4.3 times for Adani Capital and 3.4 times for Adani Housing). Both, Adani Capital and Adani Housing have adequate access to capital to scale up its business, with the Adani group having committed equity capital of Rs 600 crore over the medium term which has been fully infused; latest infusion being Rs 150 crore during fourth quarter of fiscal 2022 and Rs 25 crore in September 2022. Gearing, at consolidated level for the financial services business is expected to increase as business scales up. Further, with improving profitability, internal accruals are also expected to augment the capital position of the businesses. Additionally, networth coverage for net NPAs remained high at around 27 times as on March 31, 2023.
Improvement in earnings profile During fiscal 2023, including the upfront income from direct assignment (DA), Adani Housing reported a profit of Rs 14 crore. Adani Capital reported a net profit of Rs 91 crore. during the same period. Adani Housing & Adani Capital had incurred high operating expenses for setting up the requisite infrastructure in the initial years of business. With gradual scale-up in loan book of the businesses, earnings profile has improved and businesses at a consolidated level turned profitable in fiscal 2021. While Adani Capital remained profitable over the last 5 years, Adani Housing was reporting losses till fiscal 2020, resulting in losses at a consolidated level. Profitability was impacted in fiscal 2022 due to higher credit costs and operating expenses from continued branch expansion and hiring of manpower. Adani Housing and Adani Capital reported profit of Rs 5.8 crore and Rs 7.2 crore respectively in FY22. Provisioning coverage ratio (PCR) was 39% as on March 31, 2023 for both Adani Housing and Adani Capital. The ability of the management to improve and sustain profitability will be a monitorable.
Experienced management The financial services businesses have experienced management teams to run operations and scale up business in both the housing finance and non-housing finance businesses. Long track record and extensive experience of the management team in the financial services space has helped establish the group’s track record in the lending business in the four plus years since inception. In the existing set up, the management has scaled up the businesses to an AUM of Rs 3,977 crore as on March 31, 2023, while maintaining adequate asset quality in the challenging macro-environment.
Weakness: Small scale of operations Adani Capital commenced operations in 2017 and the housing finance business commenced operations in 2018. Consolidated loan book witnessed a healthy three-year compound annual growth of ~50%; with overall assets under management (AUM) at Rs 3,977 crore as on March 31, 2023 (Rs 2,436 crore as on March 31, 2022). Disbursements have also improved in fiscal 2023 to Rs 2,503 crore from Rs 1,342 crore a year back.
The lending business is well diversified across asset classes with 100% of the portfolio being towards retail segments. As on March 31, 2023, the company operated in 6 verticals – business loans contributed 35% of the AUM followed by farm sector finance (28%), commercial vehicle loans (17%), home loans (12%), supply chain finance (4%), and loan against property (4%). Geographically, the portfolio is diversified across states such as Gujarat, Maharashtra, Rajasthan, Karnataka, Andhra Pradesh, Telangana, Madhya Pradesh, UP and Tamil Nadu.
Post the implementation of RBI’s November 12, 2021 circular, the companies reported an inch-up in GNPAs in December 2022. However supported by collection and recovery efforts and write-offs of around Rs 20 crore, Adani Housing and Adani Capital reported GNPA of 1.4% and 1.5% respectively as on March 31, 2023 while the portfolio under 90+ days past due (dpd) was 1.3% and 1.2% respectively. Under the RBI’s Resolution Framework for COVID-19-related Stress, restructured book of Adani Housing and Adani Capital was around 0.8% of their portfolio.
Overall, given the small scale of operations, ability of the management to scale up the business and manage asset quality risks across business cycles will be key. [1] Adjusted gearing is calculated as sum of borrowing and off-book (direct assignment) upon networth |
Liquidity: Adequate Liquidity position of the financial services business is adequate. As on May 31, 2023, Adani Housing’s cash and cash equivalent of Rs 33 crore and expected inflows of Rs 25 crore over June-August 2023 are expected to take care of debt repayments of Rs 37 crore over the same period.
As on May 31, 2023, on a consolidated basis, Adani Capital and Adani Housing’s liquidity position was adequate with cash and cash equivalents of Rs 97 crore and expected inflows of Rs 341 crore over June-August 2023 against debt obligation of Rs 309 crore over the same period. |
Outlook: Stable CRISIL Ratings believes Adani Housing, along with Adani Capital, will continue to derive financial, managerial, and operational support from the Adani group and its promoter family, and will maintain comfortable capitalisation. |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company Adani Capital received the non-banking financial company license in 2017 and provides MSME finance - business loans, farm sector finance (tractor loans), commercial vehicle loans, and supply chain finance. Adani Housing received the housing finance license in June 2018. The company is primarily engaged in the affordable housing segment and offers two products: home loans and LAP. As of March 2023, Adani Capital and Adani Housing had 166 operational branches in Gujarat, Maharashtra, Rajasthan, Karnataka, Madhya Pradesh, Andhra Pradesh, Telangana, UP and Tamil Nadu with an AUM of Rs 3,977 crore
During fiscal 2023 the businesses reported a PAT of Rs 105 crore on a total income (net of interest expense) of Rs 389 crore as against a PAT of Rs 13 crore on a total income (net of interest expense) of Rs 182 crore in fiscal 2022.
Adani Housing reported a PAT of Rs 14 crore on a total income (net of interest expense) of Rs 60 crore for fiscal 2023 as against a PAT of Rs 6 crore on a total income (net of interest expense) of Rs 35 crore in the previous fiscal. |
Key Financial Indicators Financial services business (Adani Capital & Adani Housing)
*managed assets includes the off-book AUM
Adani Housing (Standalone)
*managed assets includes the off-book AUM |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*yet to be issued &interchangeable with short term bank loan facility |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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