Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA+/Stable/CRISIL A1+’ ratings on the non-convertible debentures and commercial paper of Aseem Infrastructure Finance Limited (AIFL).

 

The ratings centrally factor in the significant benefits and financial flexibility arising from the strong sponsors of AIFL. The Government of India (GoI) holds 31% stake in the company, while the National Investment and Infrastructure Fund (NIIF) Strategic Opportunities Fund (SOF), managed by National Investment and Infrastructure Fund Ltd (NIIF), holds 59%. The balance 10% is owned by Sumitomo Mitsui Banking Corporation Japan (SMBC). CRISIL Ratings believes AIFL will receive strong support from GoI as the company is strategically important to the government, given its important role in the development of the Indian infrastructure sector. This is also reflected in the Rs 6,000 crore equity commitment by the GoI under Atmanirbhar Bharat 3.0, across AIFL and NIIF Infrastructure Finance Ltd (NIIF IFL; a non-banking financial company (NBFC)-infrastructure debt fund (IDF)). The ratings also factor in the comfortable capitalisation of AIFL, its ability to raise funds at competitive rates, given its shareholding, operational synergies with the NIIF platform and an experienced management team. These strengths are partially offset by moderate albeit, growing scale of operations.

 

AIFL was incorporated on May 23, 2019, and initiated lending operations in August 2020. With healthy growth, the company’s loan portfolio stood at Rs 13,284 crore as on March 31, 2024, with over 79% of exposure towards operational projects. The gearing, at 3.9 times as on March 31, 2024, is expected to increase gradually to about 4-5 times on a steady state basis over the medium to long term.

 

This Rating Rationale (RR) is being published in line with regulatory timelines, while the rated entity has appealed the rating. CRISIL Ratings is evaluating the appeal along with additional information shared and shall publish a separate RR after the same is completed.

Analytical Approach

CRISIL Ratings has considered the standalone business and financial risk profiles of AIFL and the expectation of support from sponsors, including the GoI.

Key Rating Drivers & Detailed Description

Strengths:

• Significant benefits and financial flexibility on account of strong sponsors

As on June 30, 2024, SOF (managed by NIIF) had 59% equity stake in AIFL and the GoI had 31%, with the balance 10% held by SMBC. NIIF is a collaborative investment platform for Indian and international investors, anchored by the GoI. It invests across asset classes such as infrastructure, private equity and other diversified sectors in India through three funds: the Master Fund, Fund of Funds and Strategic Opportunities Fund. GoI holds 49% stake in NIIF, and the rest is held by domestic and global institutional investors. The Board of Directors of AIFL include three nominee directors and three independent directors.

 

AIFL also benefits from operational and underwriting synergies with NIIF IFL. It is the sponsor of NIIF IFL and holds 30.8% stake in the company with SOF holding 39.7%. While AIFL intends to finance infrastructure assets across the project lifecycle with a mix of operating, brownfield and greenfield assets, NIIF IFL will be into operating assets under IDF regulations. As both, AIFL and NIIF IFL, operate under SOF, they complement each other in terms of sector expertise, underwriting, reach to investor base and a shared knowledge pool with an integrated platform.

 

Given the important role that AIFL is expected to play by offering funding assistance to infrastructure projects, it will be strategically important to GoI and should therefore receive strong support. The strategic importance and support are reflected in the sizeable equity commitments of the GoI across AIFL and NIIF IFL. AIFL also benefits from its sovereign ownership in being able to raise resources at competitive rates. CRISIL Ratings believes GoI will continue to be a key investor in AIFL through direct and indirect (via NIIF) ownership. NIIF, so far, has received ~Rs 20,000 crore of capital commitments from the GoI across its three funds.

 

• Comfortable capital position

AIFL has comfortable capitalisation, supported by flexibility to raise additional capital and presence of strong sponsors. Classified as an NBFC-IFC (infrastructure finance company), AIFL has to maintain minimum Tier-I and overall capital adequacy ratio (CAR) of 10% and 15%, respectively. As on March 31, 2024, these ratios stood at 19.8% and 20.6%, respectively, with networth of Rs 3,005 crore. While the gearing was 3.9 times as on March 31, 2024, it is expected to increase gradually, with steady-state gearing expected around 4-5 times over the medium to long term.

 

Pursuant to the Atmanirbhar Package 3.0, the GoI has approved infusion of funds up to Rs 6,000 crore across AIFL and NIIF IFL. The investment agreement is in place and allows AIFL to draw down additional capital as and when required. This is over and above the capital commitment of Rs 20,000 crore by the GoI across the three funds of NIIF. Furthermore, AIFL raised equity capital from SMBC in March 2022 and is in discussions with other external strategic investors for raising equity capital.

 

CRISIL Ratings expects the capital profile for AIFL to remain comfortable over the medium term, supported by regular capital infusion and flexibility to raise capital.

 

• Experienced management

AIFL’s senior management team comprises personnel with several years of experience in the infrastructure finance space and across critical business functions. Mr Virender Pankaj, the chief executive officer (CEO), oversees the operations. He has over 30 years of experience in lending to sectors such as power, roads, social and industrial finance. The management has also put in place strong risk management systems, processes and policies.

 

Weakness:

• Moderate, albeit growing, scale of operations

AIFL commenced operations in August 2020, and has a moderately seasoned loan portfolio. Overall loan book stood at Rs 13,284 crore as on March 31, 2024 (Rs 11,564 crore as on March 31, 2023). AIFL has funded 152 projects so far, and out of the outstanding portfolio 79% are operational as on March 31, 2024. the company has gradually added greenfield as well as brownfield projects in it’s portfolio, in addition to the growth in operational projects. However, operational projects will retain a major share. The dedicated and experienced team and adequate risk management systems and processes should help the company grow its loan book responsibly.

 

AIFL had Nil gross stage 3 assets (GS3) as on March 31, 2024. In addition, the company has not reported any days past due (DPDs) since starting of operations. However, the asset quality needs to be seen over a longer period, given the high concentration in the loan book and the inherent nature of the infrastructure funding business. Though exposure to risk will be lower in the initial stage — as has been the case till now — with focus on operational or near operational projects, as the company diversifies into under-construction projects, its ability to maintain adequate asset quality on a steady-state basis and successfully scale up the business will be monitorable.

Liquidity: Strong

As per the structural asset liability management (ALM) statement as on May 30, 2024, AIFL had a cumulative positive mismatch in the buckets of up to one year. As on June 30, 2024, AIFL had liquidity of ~Rs 2,340 crore in the form of cash balance, government securities and unutilised bank lines against debt of Rs 483.7 crore maturing over the next three months. Further, advances (performing) of Rs 825.6 crore are expected to flow in over next three months.

Outlook: Stable

CRISIL Ratings believes AIFL will remain strategically important to and will continue to receive strong capital and operational support from the GoI and NIIF - SOF. AIFL will also benefit from sovereign ownership in raising resources at competitive rates.

Rating Sensitivity factors

Upward factors

• Building a leading market position across diversified sectors
• Comfortable asset quality and earnings with return on assets around 1.7% on a sustained basis

 

Downward factors

• Decline in strategic importance to or support received from the GoI and/or SOF
• Significant weakening in asset quality and profitability exerting pressure on capitalisation, reflected in gearing increasing to, and remaining above, 5 times for a prolonged period

About the Company

AIFL, incorporated in May 2019, is registered as an NBFC-IFC with the Reserve Bank of India. The company commenced operations from August 2020, and funds infrastructure projects. As on March 31, 2024, it had sanctioned financial assistance of Rs 23,954 crore to 152 infrastructure projects and had outstanding loans of Rs 13,284 crore with renewables projects constituting ~48% of the book, with other major sectors being roads (32%) and power distribution (5%) and smaller exposure to segments such as airport, logistics, data centre, transmission.

 

For fiscal 2024, AIFL reported a profit after tax (PAT) of Rs 205 crore and total income of Rs 1,196 crore (Rs 146 crore and Rs 789 crore, respectively, in the previous fiscal).

Key Financial Indicators

As on / for the period ended Mar 31	Unit	2024	2023	2022
Total assets	Rs crore	14,616	12,887	8472
Total income	Rs crore	1196	789	314
Profit after tax	Rs crore	205	146	85
Gross stage 3	%	Nil	Nil	Nil
Overall capital adequacy ratio	%	20.6	21.2	35.2

 

Any other information: Not applicable

Annexure - Details of Instrument(s)

ISIN	Name of instrument	Date of allotment	Coupon rate (%)	Maturity date	Issue size (Rs crore)	Complexity level	Rating assigned with outlook
INE0AD507085	Non- convertible debentures	14-Jul-2022	8.25%	14-Jul-2027	250	Simple	CRISIL AA+/Stable
INE0AD507119	Non- convertible debentures	10-May-2023	8.30%	10-May-2028	150	Simple	CRISIL AA+/Stable
NA	Non- convertible debentures*	NA	NA	NA	200	Simple	CRISIL AA+/Stable
NA	Commercial paper	NA	NA	7-365days	500	Simple	CRISIL A1+

*Yet to be issued