Rating Rationale
February 13, 2024 | Mumbai
Mahaveer Finance India Limited
Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.170 Crore (Enhanced from Rs.100 Crore)
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
 
Rs.30 Crore Subordinated DebtCRISIL BBB/Stable (Reaffirmed)
Rs.10 Crore Non Convertible DebenturesCRISIL BBB/Stable (Reaffirmed)
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 BBB/Stable’ rating on the bank facilities and debt instruments of Mahaveer Finance India Ltd (Mahaveer Finance).

 

The rating continues to reflect the consistent growth in scale of operations while maintaining capitalisation metrics at adequate levels; extensive experience of the promoters; and adequate earnings profile and diversified resource profile. These strengths are partially offset by average asset quality and geographically concentrated operations.

 

The company finances commercial vehicles in the used vehicle segment. Assets under management (AUM) registered consistent growth and reached Rs 700 crore as of December 2023 (Rs 562 crore as on March 31, 2023). This is supported by adequate capital position, as reflected in networth of Rs 118 crore and adjusted gearing of 4.7 times (including securitisation), as on December 31, 2023; against Rs 106 crore and 4.5 times, respectively, as of March 2023. CRISIL Ratings believes that the company is expected to maintain on-book gearing of below 5 times over the medium term.

 

As far as asset quality is concerned, 90+ days past due (dpd) remained stable at 4.2% as on December 31, 2023, compared with 2.7% as on March 31, 2023 (4.2% as on March 31, 2022). The company has been operating predominantly in the used vehicle segment and the ability to maintain portfolio quality even though they have adequate risk management system and long track record of operations in existing geographies will be monitorable.

 

Earnings profile remains robust, with average three-year return on assets (RoA) of 2.1%. The company continues to demonstrate track record of raising funds through diversified avenues, though ability to do so at competitive rates remains critical for profitability.

Analytical Approach

CRISIL Ratings has considered the business and financial risk profiles of Mahaveer Finance on a standalone basis.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: Experience of four decades has enabled the promoters to develop an in-depth understanding of borrower behaviour and maintain comfortable asset quality, which should continue to support business risk profile. The promoters have expanded their branch network in the southern region to Tamil Nadu, Andhra Pradesh, Telangana and Pondicherry. The managing director, Mr Mahaveer Chand Dugar, has substantial experience in the vehicle financing business and has also conducted training sessions for other financiers. He is supported by his sons, Mr M Deepak Dugar and Mr M Praveen Dugar, who are also the co-promoters. Mr Deepak and Mr Praveen have been involved in the daily operations for over 20 years.

 

  • Adequate capitalisation metrics: Networth and adjusted gearing stood at Rs 118 crore and 4.7 times, respectively, as on December 31, 2023 (Rs 107 crore and 4.5 times, respectively, as on March 31, 2023). The company had raised equity capital of Rs 25 crore in fiscal 2018 from Banyan Tree Growth Capital II LLC, and now plans to raise additional equity in the fourth quarter of fiscal 2024 to support envisaged growth plans. The management stance is to keep gearing below 5 times over the medium term, considering growth in loan book.

 

  • Earnings profile remains adequate: The company has exhibited a robust track record of profitability since inception, operating in the used commercial and personal vehicle segments. The return on managed assets (RoMA) has been consistent at 2.1-2.5% over the last three fiscals. Also, losses on repossessed assets have been negligible. During the nine months ended December 2023, RoMA stood 2.0% on account of increased operating expenses. Net interest margin reduced slightly to 8-8.3% due to increased cost of borrowings. Operating expenses increased remained in the range between 4.2-4.5% over the past three years due to changes in the company’s organisational structure (under process for the past one year). However, RoMA will remain adequate for current and expected scale of operations.

 

  • Diversified resource profile: The company procures funding from banks, non-banking financial companies (NBFCs), and financial institutions. Of the Rs 353 crore raised during April 2023 to January 2024, Rs 123 crore was raised in the third quarter of fiscal 2024. The company also has sanctions of Rs 185 crore in the pipeline from banks, small finance banks, and NBFCs to support future growth.

 

Weaknesses:

  • Average asset quality: On account of write-offs of Rs 4.5 crore during end of fiscal 2023, adequate risk management practices and increased focus on recovery, the company improved its 90+ dpd to 2.7% as on March 31, 2023 from 4.2% in March 2022, As on December 31, 2023, the 90+dpd stood at 4.2%. Furthermore, track record of repossessing vehicles and recovering overdues has been good. The company’s current collections (excluding overdues), which were impacted during the pandemic, improved to above 80% over the trailing 12 months from 68% in the previous fiscal. CRISIL Ratings believes that over the medium term, the ability of the company to improve and control its asset quality while scaling up substantially will remain monitorable.

 

  • Geographically concentrated operations: Mahaveer Finance mainly operates in Tamil Nadu (accounts for 48% of the overall portfolio), followed by Andhra Pradesh (36%), Telangana (13%) and Pondicherry (3%). While the company intends to gradually expand its presence in other southern states, Tamil Nadu is likely to remain the key market over the medium term.

Liquidity: Adequate

As on December 31, 2023, Mahaveer Finance had liquidity of Rs 82 crore included cash/liquid investments and unutilised cash credit/working capital demand loan. Liquidity buffer (assuming nil collections) for debt repayment and operating expenses arising over January 2024 stood at above 1.8 times. Month-on-month collections (current collections excluding overdue and prepayments) stood at Rs 27-30 crore during the last 6 months.

Outlook: Stable

Mahaveer Finance will continue to benefit from the extensive experience of its promoters and maintain adequate capitalisation.

Rating Sensitivity factors

Upward factors:

  • Ability to significantly scale up loan book while maintaining RoMA at over 2.5%
  • Sustainable improvement in asset quality with 90+ dpd improving below 5%
  • Further improvement in capital position while maintaining gearing

 

Downward factors:

  • Steady state adjusted gearing exceed 5 times
  • Earnings profile, remaining average with RoMA less than 1%
  • Significant deterioration in asset quality metrics

About the Company

Incorporated in 1981 and promoted by Mr Mahaveer Chand Dugar and his sons (Mr M Deepak Dugar and Mr M Praveen Dugar), Mahaveer Finance was registered as a deposit-taking NBFC with the Reserve Bank of India (RBI). It was taken over by the current management in 1987. In 2015, the company surrendered its deposit-taking licence to the RBI, and was reconstituted as a non-deposit-taking NBFC asset finance company. It is engaged in used commercial vehicle and passenger vehicles financing in Tamil Nadu, Andhra Pradesh, Telangana and Pondicherry through its network of 53 branches as on December 31,2022.

Key Financial Indicators

Particulars for the year / period ended

Unit

Dec-2023

Mar-2023

Mar-2022

Mar-2021

Total managed assets

Rs Cr

819

720

527.1

380.4

Total income

Rs Cr

98

103

85.4

60.5

Profit after tax (PAT)

Rs Cr

11.4

14.4

10.5

8.4

90+dpd

%

4.2

2.7

4.2

4.2

Adjusted gearing

Times

4.7

4.5

3.6

3.5

Return on managed assets

%

2.0*

2.3

2.3

2.5

*on an annualised basis

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Subordinated Debt* NA NA NA 15 Complex CRISIL BBB/Stable
INE911L08053 Subordinated Debt 16-Mar-2022 16% 16-Mar-2027 15 Complex CRISIL BBB/Stable
NA Cash Credit NA NA NA 29.5 NA CRISIL BBB/Stable
NA Proposed Cash Credit Limit NA NA NA 0.5 NA CRISIL BBB/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 0.23 NA CRISIL BBB/Stable
NA Term Loan NA NA 18-Sep-2025 8.67 NA CRISIL BBB/Stable
NA Term Loan NA NA 20-Jun-2026 9.67 NA CRISIL BBB/Stable
NA Term Loan NA NA 28-Jul-2025 15 NA CRISIL BBB/Stable
NA Term Loan NA NA 28-Mar-2026 13.61 NA CRISIL BBB/Stable
NA Term Loan NA NA 30-Jun-2025 13.97 NA CRISIL BBB/Stable
NA Term Loan NA NA 30-Jun-2025 8.85 NA CRISIL BBB/Stable
NA Term Loan NA NA 10-Jan-2027 20 NA CRISIL BBB/Stable
NA Term Loan NA NA 27-May-2027 30 NA CRISIL BBB/Stable
NA Term Loan NA NA 30-Mar-2026 20 NA CRISIL BBB/Stable

*Yet to be issued

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 170.0 CRISIL BBB/Stable   -- 04-09-23 CRISIL BBB/Stable 01-03-22 CRISIL BBB/Stable 16-03-21 CRISIL BBB-/Stable CRISIL BBB-/Negative
      --   -- 29-08-23 CRISIL BBB/Stable 24-02-22 CRISIL BBB/Stable   -- --
      --   -- 22-02-23 CRISIL BBB/Stable   --   -- --
Non Convertible Debentures LT 10.0 CRISIL BBB/Stable   -- 04-09-23 CRISIL BBB/Stable 01-03-22 CRISIL BBB/Stable 16-03-21 CRISIL BBB-/Stable CRISIL BBB-/Negative
      --   -- 29-08-23 CRISIL BBB/Stable 24-02-22 CRISIL BBB/Stable   -- --
      --   -- 22-02-23 CRISIL BBB/Stable   --   -- --
Subordinated Debt LT 30.0 CRISIL BBB/Stable   -- 04-09-23 CRISIL BBB/Stable 01-03-22 CRISIL BBB/Stable   -- --
      --   -- 29-08-23 CRISIL BBB/Stable   --   -- --
      --   -- 22-02-23 CRISIL BBB/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 Punjab National Bank CRISIL BBB/Stable
Cash Credit 19 State Bank of India CRISIL BBB/Stable
Cash Credit 0.5 CSB Bank Limited CRISIL BBB/Stable
Cash Credit 5 Indian Overseas Bank CRISIL BBB/Stable
Proposed Cash Credit Limit 0.5 Not Applicable CRISIL BBB/Stable
Proposed Long Term Bank Loan Facility 0.23 Not Applicable CRISIL BBB/Stable
Term Loan 13.97 Suryoday Small Finance Bank Limited CRISIL BBB/Stable
Term Loan 8.85 State Bank of India CRISIL BBB/Stable
Term Loan 15 Fincare Small Finance Bank Limited CRISIL BBB/Stable
Term Loan 13.61 IFFCO Kisan Finance Limited CRISIL BBB/Stable
Term Loan 8.67 AU Small Finance Bank Limited CRISIL BBB/Stable
Term Loan 9.67 Capital Small Finance Bank Limited CRISIL BBB/Stable
Term Loan 20 Small Industries Development Bank of India CRISIL BBB/Stable
Term Loan 30 State Bank of India CRISIL BBB/Stable
Term Loan 20 YES Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Finance Companies

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