Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA-/Stable/Crisil A1+’ ratings on the long term bank facilities and commercial paper of Mirae Asset Financial Services (India) Pvt Ltd (MAFS).

 

The rating centrally factors in MAFS’ strategic importance to, and expectation of strong support from, its parent, Mirae Asset Capital Company Limited, Korea (MACK, a part of Mirae Asset Financial Group [MAFG]), both on an ongoing basis and in case of distress. The rating also factors in healthy capitalisation and experienced management team of MAFS. These strengths are partially offset by the nascency and relatively small scale of operations.

 

Established on February 13, 2020, MAFS commenced its lending business in July 2022 and is currently engaged in lending against securities (LAS), personal loans through co-lending and corporate lending. As on December 31, 2024, assets under management (AUM) stood at Rs 1,012 crore comprising Loan against shares and mutual funds (LAS (82%), personal loans through co-lending (17%) and corporate loans (<1%). Overall Gross non-performing assets (GNPAs) improved to 0.2% as on December 31, 2024, as compared to 0.9% as on December 31, 2023 driven by reduction in GNPAs in co-lending portfolio which stood at 1.2% as on December 31, 2024, as against 2.4% as on December 31, 2023. Asset quality metrics within the LAS and corporate lending book have remained sound with nil NPA.

 

The financial risk profile of MAFS is supported by its healthy capitalisation metrics backed by equity infusion by the parent. The company turned profitable in fiscal 2023 and has remained profitable since. For the nine months ending December 31, 2024, it reported a net profit of Rs 10.2 crore. As the portfolio scales and gains more vintage, the company’s ability to maintain sound asset quality on a steady state as well as profitably scale up its operations remains a monitorable.

Analytical Approach

For arriving at the rating, Crisil Ratings has assessed the standalone credit risk profile of MAFS and factored in strong managerial, operational, and financial support from MACK.

Key Rating Drivers & Detailed Description

Strengths:

• Expectation of continued support from, and high strategic importance to, the parent – MACK: MACK, along with MAFG, views India as an important market for its overseas expansion strategy. To support business growth and with a view to build a diversified financial services business in India, MAFG, has infused Rs 332 crore as equity into MAFS - making it a wholly owned subsidiary of the group. Presently, MACK holds a 40% stake in MAFS whereas Mirae Asset Global Investments Company Limited (MAGI) holds 51% in the company. The remaining stake is held by two other MAFG companies.

 

By virtue of its strategic importance to MACK and the MAFG ecosystem, MAFS receives operational, managerial, and financial support from the former. Additionally, Mr. Sehwan Jin, representative of MACK oversees the day-to-day operations, provides oversight in terms of risk management and other aspects of operations, and helps align the strategic goal of the MAFS with MACK and MAFG.

 

Crisil Ratings believes the Indian business will remain strategically important to the parent and the degree of ownership, brand sharing and operational integration will lead to MAFS receiving continued support from the parent, on an on-going basis and in case of distress.

 

• Experienced senior management team: The senior management team of MAFS has significant experience in their respective segments. Mr. Krishna Kanhaiya, who is the Chief Executive Officer & Director, has over two decades of experience in the financial sector. He has previously served as a board member of Mirae Asset Capital Markets (India) Pvt Ltd (MACM) and as the CFO of Mirae Asset Investment Managers (India) and the CFO of Mirae Asset Global Investments (India) Private Limited, the Indian asset management arm of the group. Apart from the senior leadership, the second line of management has also been strengthened in the last few fiscals and comes in with adequate expertise.

 

Crisil Ratings believes the extensive experience of the management will aid the company’s growth and expansion plans over the medium to long term.

 

• Adequate capitalisation for current and planned scale of operations: Capitalisation remains adequate, as reflected in net worth and gearing of Rs 346 crore and 2.5 times as on December 31, 2024 as against Rs 336 crore and 1.5 times as on March 31, 2024 (Rs 330 crore and 0.01 time respectively as on March 31, 2023). On the same date, the overall capital adequacy ratio (CRAR) stood at 24.15%. Thus far, MAFG has infused Rs 332 crore of capital into MAFS, through its various subsidiaries. These funds are primarily deployed in the lending business.

 

Capitalisation is expected to remain comfortable, supported by capital support from MACK and, a gradual increase in internal accruals.

 

Weakness:

• Nascency and small scale of operations: Over its limited operational history of over two years, MAFS has gradually started building its portfolio across segments such as LAS, personal loans, and corporate lending. The loan book has grown by 56% year to date to Rs 1,012 crore for the nine months ended December 31, 2024, MAFS’ scale of businesses remains modest making it a small player in the NBFC (non-banking financial company) sector. In terms of portfolio mix as on December 31, 2024, 83% of its advances comprised of LAS, personal Loans constituted 17% whereas balance was constituted by corporate Loans.

 

In terms of asset quality, the performance of the LAS and corporate loan book has remained stable, evidenced by nil 90+ dpd (days past due) in both the portfolios. The LAS book comprises majorly of loan against mutual equity funds. These loans have LTV of 45% or less. For equity shares LTV is lower depending upon the script. In the co-lending (personal loan) book – 90+ dpd has improved to 1.2% (30+ dpd stood at 4.7%), as on December 31, 2024, from 2.43% as on December 31, 2023 (30+ dpd stood at 4.1% as on the same date), which was a factor of initial slippages incurred during nascent stage of operations. The company also receives a 5% FLDG for the amount disbursed in the co lending arrangement which acts as a protection for credit losses. Nonetheless, the integration and risk management practices have been gradually improving since then. Considering the low track record and low seasoning of the lending book, maintaining asset quality alongside growth - especially in the personal loans and corporate lending segment - will be a key monitorable.

Liquidity: Strong

The asset liability management profile was adequate as on December 31, 2024, with positive cumulative mismatches in all buckets. Cash & cash equivalents and liquid investments stood at Rs 122.77 crore (Including unutilised bank limit) as on December 31, 2024. Against this the company has total debt repayments of Rs 250 crore due in the next six months (Rs 225 crore are commercial paper repayments which are expected to get rolled over). Further the company also benefits from the support of MACK on an ongoing basis.

Outlook: Stable

Crisil Ratings believes MAFS will remain strategically important to, and will continue to receive financial, managerial, and operational support from MACK.

Rating sensitivity factors

Upward Factors:

• Upward revision in the Crisil Ratings credit view on MACK.
• Significant improvement in the market position of MAFS with steady increase in profitability (return on assets above 3%) on a sustained basis.
   

Downward factors:

• Decline in expected support from, or strategic importance to, MACK or a downward revision in the credit view of Crisil Ratings on the parent.
• Significant deterioration in asset quality of MAFS eroding capitalisation, reflected in overall capital adequacy ratio (CAR) declining to and remaining below 20% for a prolonged basis.

About the Company

MAFS was incorporated in Mumbai as private limited company on February 13, 2020. The company got its non-deposit taking NBFC license from RBI in February 2021.

 

MAFS commenced lending business in July 2022 by launching its first product – loan against mutual funds which is available on its mobile app as well as website digitally.

 

Over time, MAFS has ventured into personal loans through co-lending and corporate loans. The company primarily operates from the Mumbai office and has presence in Pune Delhi and Hyderabad through its sales team. The company has retail clients from all over India for both its retail products – LAS as well as Personal Loan. It has more than 1,900 Channel Partners onboarded for sourcing LAS clients.

 

For the first nine months of fiscal 2025, the company generated a PAT of Rs 10.22 crore on a total Income of Rs 91.95 crore, compared with a PAT of Rs 5.60 crore on a total income of Rs 71.82 crore for fiscal 2024.

Key Financial Indicators

As on / for the period ended	Unit	March-24	March-23	March-22
Total assets	Rs crore	875.1	335.7	144.7
Total income	Rs crore	71.8	18.39	4.84
PAT	Rs crore	5.6	0.24	-2.63
GNPA	%	1.5	0.00	0.00
Overall capital adequacy ratio	%	33.19	124.49	-
Return on assets (annualised)	%	1.45	0.10	-3.57

 

As on / for the period ended	Unit	December-24	December-23
Total assets	Rs crore	1170.0	649.5
Total income	Rs crore	91.92	51.71
PAT	Rs crore	10.22	4.23
GNPA	%	0.21	0.89
Overall capital adequacy ratio	%	24.15	43.74
Return on assets (annualised)	%	1.33	1.15

Disbursements commenced in July 2022

Any other information: Not Applicable