| Pioneer Finance Company Private Limited | ||||
| Ratings reaffirmed and Withdrawn | ||||
| 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 rating on the long-term bank facilities of Pioneer Finance Company Private Limited (Pioneer Finance). Subsequently, the ratings have been withdrawn on bank facilities based on request of the company and on receipt of a no-objection details from lenders. The withdrawal is in line with CRISIL Rating's policy on withdrawal of its ratings.
The rating primarily driven by continued deterioration in asset quality metrics and its consequent impact on earnings profile. Company’s asset quality has continued to remain in stress post the impact it faced during Covid first and second wave. The rating also continue to reflect the extensive experience of the promoters in the two-wheeler finance business ad moderate capital position. |
Analytical Approach For arriving at the rating, CRISIL Ratings has assessed the standalone business and financial risk profiles of Pioneer Finance. |
Key Rating Drivers & Detailed Description Weaknesses:
Pioneer finance’s asset quality has seen sharp deterioration during fiscal 2022. Asset quality, in terms of 90+dpd increased to around 52.4% as on December 31, 2021, from 26.9% as on March 31, 2021. The deterioration in Gross NPA percentage is more visible on account of de-growth in portfolio in last 2 fiscals. Due to very minimal disbursements asset base reduced to Rs 16.5 crore as of December 2021 (Rs 36.8 crore as of March 2020). The management has initiated stringent steps to improve collections and reduce gross NPAs. Majority of internal staff has been deployed on the collections (both overdue and current bucket). Some of the steps taken by the company has shown early signs of recovery; the average monthly collections from October 2021 to December 2021 improved to 112% from around 97% from July 2021 to September 2021.
Earnings have been impacted in the past 2-2.5 years primarily due to higher credit losses, declined in portfolio, leads to decline in top line. There was a net loss of Rs 2.5 crore in fiscal 2021 (Rs. 2.8 crore in fiscal 2020). The company has taken stringent steps to reduce operating costs during fiscal 2021 and nine months ended fiscal 2022. Employee costs have been reduced through salary cuts, and linking of the pay structure for a majority of the employees to their performance.
Strengths:
The promoter, Mr Rabindu Nalinkumar Shah, has an experience of more than 15 years in the two-wheeler financing segment which should continue to support the business over the medium term. Additionally, Mr Shah also has a fair knowledge about the area/locations wherein the company operates. All the key processes such as underwriting and credit are designed by him. Apart from the current challenges (due to the pandemic), the company has not faced any major asset quality issues in the past 4-5 years. In order to increase collections and curtail delinquencies, the promotor has taken significant measures like hiring a solicitors’ firm and expanding the in-house collection team.
Capital position of Pioneer Finance has been moderate with networth of Rs 8.9 crore (including loans from promoter/shareholders of Rs 3.0 crore). The capital position has been affected due to negative accretions during last 2.5 years. The absolute networth of the company has reduced by around Rs 3.5 crore during last 2-3 years owing to negative accretions. In terms of gearing, it has shown declining trend, given the company has reduced focus on growth. The gearing has reduced to 2.4 times (estimated) as on December 31, 2021, from 3.0 times as on March 31, 2021. Nevertheless, the promoter (along-with other shareholders) have infused funds in form of loans in the past (Rs 3.0 crore as of March 31, 2021). |
Liquidity: Stretched Pioneer Finance’s liquidity is just about sufficient to cover total debt obligation and operating expenses from January to April 2022. The company has cash balance of Rs 4.38 crore (Rs 0.13 crore of cash and cash equivalents and Rs 4.25 crore of unutilised CC/WCDL) as on December 31, 2021. It had total outflows of Rs 3.82 crore between January and April 2022. The liquidity buffer would be sufficient to cover the debt repayment. The promoter constantly monitors the liquidity position and has plans to infuse funds. In terms of collections, company has month-on-month collections rate in range of Rs 1.2-1.8 crore during last 5-6 months with efficiency of over 100%. |
Outlook: Stable Pioneer Finance should continue to benefit from the extensive experience of the promoter, and maintain moderate capitalisation over the medium term. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Pioneer Finance was started in 1998 as consumer finance business by Mr Rabindu Nalinkumar Shah as proprietary concern. Over the years, the firm started providing personal loans and consumer durable loans. In 2000, Mr. Shah ventured into two-wheeler financing business. Since then, the company has been focusing mainly on two wheeler financing. Presently, operations are mainly in Mumbai (western suburbs) and Thane regions. The portfolio size was Rs 16.7 crore as on December 31, 2021, against Rs 28.2 crore as on March 31, 2021 (Rs 36.8 crore as on March 31, 2020). Due to asset quality issues faced during the pandemic, the company has scaled down operations and is focusing mainly on collections. |
Key Financial Indicators
*Estimated **Annualized |
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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||
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Criteria Details
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