| Nissan Renault Financial Services India Private Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A1+’ rating to the Rs.400 crore commercial paper programme of Nissan Renault Financial Services India Private Limited (NRFSI).
The rating continues to factor in NRFSI’s strategic importance to its ultimate parent, Nissan Motor Company (NMC; rated BBB-/Negative/A-3 by S&P Global Ratings) and its strong moral obligation to support the Indian subsidiary, both on an ongoing basis and in the event of distress. The expectation of support is based on majority ownership in NRFSI, the shared brand, and strong operational linkages. The ratings also factor in the adequate liquidity policy and comfortable capitalisation. These strengths are partially constrained by small scale of operations with limited track record of operations.
NRFSI’s portfolio consists of vehicle loans, with a majority to salaried customers in retail portfolio along with providing funding to dealers. NRFSI is a relatively small player in the overall vehicle finance market. It started its operations in Oct 2014. Its loan portfolio stood at around Rs 3,316 crore as on March 31, 2021 (around Rs 2,955 crore as on March 31, 2020). Around 87% of the portfolio comprised financing of new cars and the remaining was largely dealer financing, personal loans to the group employees and used car loans.
NRFSI gross non-performing assets (NPAs) stood at 2.3% as on March 31, 2021 as against 2.64% as on March 31, 2020. The improvement in NPAs was on account of stringent underwriting and increased investment in collection infrastructure done in fiscal 2021. In terms of collections, collection efficiencies after dropping to a low of 63% in April 2020 improved gradually and stood at over 95% for the month of March 2021 and April 2021. Even in May 2021, the collection efficiency was close to around 94%. With lifting of lockdown restrictions from June, CRISIL Ratings understands that collection efficiencies have improved further. Nevertheless, the sustainable improvement in the collection efficiencies and their consequent impact on the asset quality metrics remains a key monitorable.
Capitalisation remains comfortable, with a net worth of Rs 937 crore as on March 31, 2021. The shareholders have infused Rs 710 crore so far and will likely infuse further capital over the medium term to support NRFSI’s growth. Gearing was 2.5 times as on March 31, 2021 (2.4 times as on March 31, 2020) and is expected to increase over the medium term as the portfolio grows, albeit stay under 4 times.
NRFSI has strong liquidity profile driven by expectation from Nissan Motor Company to provide need-based and on-going support, in case of any exigencies. On standalone basis, as on March 31, 2021, NRFSI has negative cumulative gaps in 2 to 3 months and 3 to six months buckets. The same is due to the repayments under group loan. However, the company has got the RBI approval to roll over the group loan for next three years. Excluding group loan, there are positive cumulative gaps across the buckets. In terms of liquidity position, as on May 31, 2021, the company had cash and cash equivalents of Rs 158 crore and untulized bank lines of Rs 771 crore, against this it had debt repayments of Rs 713 crore for the next two months. |
Analytical Approach For arriving at the rating, CRISIL Ratings has factored in the support that NRFSI is expected to receive from its ultimate parent, NMC |
Key Rating Drivers & Detailed Description Strengths: * Strategic importance to, and expectation of strong support from, ultimate parent, NMC NRFSI, a joint venture between Nissan International Holdings B.V, a wholly owned subsidiary of NMC and RCI Banque, is a wholly owned subsidiary of Renault S.A. (Renault). NMC and Renault also have an alliance at the global level. NMC ultimately holds 70% and Renault ultimately holds the remaining 30% in NRFSI. NMC and Renault have infused equity capital of Rs 497 crore and Rs 213 crore in NRFSI so far, and will likely infuse further capital to support NRFSI’s growth plans as and when required. NMC, being the majority shareholder, controls the day-to-day operations of NRFSI while Renault participates in strategic decision making. Being the captive financier of Nissan, Datsun and Renault vehicles in India, NRFSI receives significant financial, operational and managerial support from NMC, given the strategic role it plays in strengthening Nissan and Renault’s market share and sales in India. NMC views India as a key market, as reflected in its presence across manufacturing, sales and marketing and financing in the country. NRFSI’s risk management policies, systems, and processes are in line with those globally approved by NMC. NRFSI also benefits from NMC’s global linkages with foreign banks operating in India Nissan group companies have also invested in NRFSI bonds. CRISIL believes that the ownership, shared brand, and strong operational integration lead to a high moral obligation on NMC to support NRFSI.
* Comfortable capitalisation Capitalisation remains comfortable, with a net worth of Rs 937 crore as on March 31, 2021. The shareholders have infused Rs 710 crore so far and will likely infuse further capital over the medium term to support NRFSI’s growth. Gearing was 2.5 times as on March 31, 2021 (2.4 times as on March 31, 2020) and is expected to increase over the medium term as the portfolio grows, albeit stay under 4 times.
Weakness: * Relatively small player in the overall finance market, with limited track record of operations NRFSI is a relatively small player in the overall vehicle finance market. It started its operations in Oct 2014. Its loan portfolio stood at around Rs 3,316 crore as on March 31, 2021 (around Rs 2,955 crore as on March 31, 2020). Around 87% of the portfolio comprised financing of new cars and the remaining was largely dealer financing, personal loans to the group employees and used car loans.
NRFSI gross non-performing assets (NPAs) stood at 2.3% as on March 31, 2021 as against 2.64% as on March 31, 2020. The improvement in NPAs was on account of stringent underwriting and increased investment in collection infrastructure done in fiscal 2021. In terms of collections, collection efficiencies after dropping to a low of 63% in April 2020 improved gradually and stood at over 95% for the month of March 2021 and April 2021. Even in May 2021, the collection efficiency was close to around 94%. With lifting of lockdown restrictions from June, CRISIL Ratings understands that collection efficiencies have improved further. Nevertheless, the sustainable improvement in the collection efficiencies and their consequent impact on the asset quality metrics remains a key monitorable. |
Liquidity: Superior NRFSI has strong liquidity profile driven by expectation from Nissan Motor Company to provide need-based and on-going support, in case of any exigencies. On standalone basis, as on March 31, 2021, NRFSI has negative cumulative gaps in 2 to 3 months and 3 to six months buckets. The same is due to the repayments under group loan. However, the company has got the RBI approval to roll over the group loan for next three years. Excluding group loan, there are positive cumulative gaps across the buckets. In terms of liquidity position, as on May 31, 2021, the company had cash and cash equivalents of Rs 158 crore and unutilized bank lines of Rs 771 crore, against this it had debt repayments of Rs 713 crore for the next two months. |
Rating Sensitivity Factors Downward factors
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About the Company NRFSI is a joint venture between Nissan International Holdings B.V, a wholly owned subsidiary of Nissan Motor Company Limited and RCI Banque S.A, a wholly owned subsidiary of Renault S.A. The company was incorporated in October 2013 and received its NBFC licence in July 2014. NRFSI finances Nissan, Renault and Datsun branded vehicles in India by extending retail credit, dealer financing and Insurance & Services.
Nissan Motor Company Limited, headquartered in Japan, is a leading international automaker with a presence in over 160 countries. Nissan reported a consolidated net loss of JPY448.7 billion on net sales of JPY7.9 trillion during FY2020 (year ending March 31, 2021). |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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