| Godrej Housing Finance Limited | ||||||
| Rated amount enhanced for Commercial Paper | ||||||
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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 bank facilities and debt instruments of Godrej Housing Finance Limited (GHFL).
The ratings centrally factor in the expectation of strong support from Godrej Industries Ltd (GIL; ‘CRISIL AA/Stable/CRISIL A1+’) and the Godrej group, both on an ongoing basis and in case of distress. This is on account of the strategic importance of the financial services businesses to GIL and the Godrej group, and the moral obligation of the latter to provide support, given the majority shareholding and common brand. The financial services businesses are housed under Godrej Capital Ltd (GCL) and comprise GHFL and Godrej Finance Ltd (GFL) and henceforth are referred to as the Godrej Capital group. The ratings also factor in the comfortable capitalisation and experienced management team of the Godrej group. These strengths are partially offset by the nascent stage of operations and limited track record of the group in the financial services business.
While GHFL is a newly established housing finance company (HFC) of the Godrej group which focuses on mortgage-backed loans, GFL is the non-banking financial company (NBFC) arm of the group with a focus on non-mortgage-backed loans including small and medium enterprise (SME) loans, loans against property (LAP) and construction financing. Both these companies are ultimately held by GIL through its subsidiary, GCL (GIL holds around 95% stake in GCL).
GHFL intends to cater to both mid-market and prime housing segments. GFL commenced lending in March 2022 and focuses on non-mortgage business. Godrej Capital group has 38 branches across 30 locations, and is gradually expanding its reach to other markets. GHFL and GFL derive synergies in terms of management, systems and treasury. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of GCL and its subsidiaries GHFL and GFL, collectively referred to as the Godrej Capital group, and factored in the strong linkages with GIL and the Godrej group in terms of operations, finance, management and infrastructure, along with a strong common brand. The ratings also factor in the strong support Godrej Capital group is likely to receive from GIL and the Godrej group, on an ongoing basis and in times of distress.
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:
GIL is the flagship company of the Godrej group (promoter and promoter group companies held 67.16% equity in GIL as on March 31, 2024). GIL is expected to maintain minimum shareholding of 51% and retain management control over the Godrej Capital group at all points of time.
The Godrej Capital group benefits from the existing ecosystem of the Godrej group. It also receives managerial and operational support from the group. Mr Pirojsha Godrej, who is on the board of directors in various group companies, is the chairman of GHFL and a non-executive director in GFL. Furthermore, the common corporate identity and brand has benefitted GHFL & GFL in terms of ability to raise funds from diverse lenders at competitive interest rates.
Weakness:
Given the initial stage of operations and investments towards requisite infrastructure, operating expenses are high, thereby constraining earnings. The Godrej Capital group incurred a loss of Rs 31 crore in fiscal 2023 (net loss of Rs 89 crore in fiscals 2022), however it broke even during first quarter of fiscal 2024 and reported a net profit of Rs 51 crore in fiscal 2024. GHFL had turned profitable in the previous fiscal and reported a net profit of Rs 80 crore in fiscal 2024 (Rs 38 crore in fiscal 2023) while GFL reported a net loss of Rs 29 crore in fiscal 2024 but it broke even during last quarter of fiscal 2024.
Earnings at a consolidated level are expected to remain modest in the near term and gradually improve thereafter with ramp-up of operations and as economies of scale kick in. The ability to successfully scale up business with healthy asset quality and profitability will remain a key monitorable. [1] Total loan book includes off-book portfolio |
Liquidity: Strong Liquidity of the Godrej Capital group is comfortable with adequate cash and equivalent (around Rs 502 crore) and unutilised bank lines (around Rs 5,878 crore) as on March 31, 2024. The group has debt obligation of Rs 1,848 crore between April 2024 and September 2024. Liquidity is supported by expectation of continued capital support from GIL and the Godrej group as well as good financial flexibility, enhancing the ability to raise funds from diverse lenders at competitive interest rates. |
Outlook: Stable The Godrej Capital group should continue to derive financial, managerial, and operational support from the Godrej group, including GIL, and maintain comfortable capitalisation. |
Rating Sensitivity factors Upward factors:
Downward factors
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About Group and the Company GIL, the flagship entity of the Godrej group, is one of India’s leading manufacturers of oleochemicals and surfactants. GIL through its subsidiaries, is also a leading player in the fast-moving consumer goods (FMCG), real estate and food and agri-sector businesses. GCL is a 95% subsidiary of GIL with the remaining 5% stake held by a private equity investor. Both GHFL and GFL, are 100% held by GCL.
GHFL received the housing finance licence from the Reserve Bank of India in October 2020. The company is primarily engaged in the mid and premium housing segments and offers home loans. Having commenced operations in November 2020, it has built a total loan book of Rs 5,858 crore as on March 31, 2024. GHFL operates through 17 branches/offices. During fiscal 2024, GHFL reported a profit of Rs 80 crore on a total income (net of interest expenses) of Rs 163 crore, compared with a profit of Rs 38 crore on a total income (net of interest expenses) of Rs 114 crore in fiscal 2023.
GFL, incorporated as Ensemble Holdings and Finance Ltd in 1992, held the NBFC license and was a part of the Godrej group. Following a change in shareholding structure, it was brought under GCL, with GIL being the ultimate holding parent. The company focuses on non-mortgage loans including SME loans and LAP, and commenced lending in March 2022. Recently it also forayed into construction financing. The company operate through 32 branches/offices. The loan book has grown to Rs 4,903 crore as on March 31, 2024. During fiscal 2024, the company reported a loss of Rs 29 crore on a total income (net of interest expenses) of Rs 216 crore, compared to a loss of Rs 69 crore on a total income (net of interest expenses) of Rs 40 crore in fiscal 2023. |
Key Financial Indicators (Godrej Capital group)
^GHFL+GFL
Key financial indicators (Godrej Housing Finance Ltd)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Not yet issued ^Interchangeable with short term bank loan facility |
Annexure – List of entities consolidated
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Criteria Details
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