| Regency Fincorp Limited | ||||
| 'CRISIL BB-/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL BB-/Stable' rating to the proposed long-term bank facility of Regency Fincorp Limited (Regency Fincorp).
The rating reflects promoter’s experience in financing space and adequate capitalisation. These strengths are partially offset by short track record, and small scale of operations, and lack of diversity in resource profile.
Regency Fincorp is non deposit taking, non banking finance company (NBFC), which has been offering unsecured short term business loan, Joint Liability Group (JLG) loan, and personal loan since 2016. Company’s portfolio stood at Rs 38.5 crore as on September 30, 2021 (Rs 34.9 crore as on March 31, 2021). The company’s portfolio has grown at CAGR of 90% during last 3.5 years (fiscal 2018 to H1 of fiscal 2022). In terms of portfolio composition, unsecured business loans accounted for around 85%, JLG loans for 11% and personal loans 4% as on June 30, 2021. The company faced limited impact due to Covid pandemic (both during first and second wave). Despite over 85% of portfolio consists of unsecured loans, the company reported nil Gross NPAs (at 90+ days past due) as on September 30, 2021. The asset quality of business loan segment, which constitute 85% of total loan portfolio, is backed by good relationship with borrowers and short tenure loan. In the JLG loan model, as there is liability on all member of group women borrower, supports regular repayment of dues. JLG portfolio is very granular with low ticket size loans.
In terms of incremental growth, the company proposes to reduce its dependence on high ticket business loans and increase its focus towards low ticket granular JLG loans. Initially, the management started extending JLG loans since 2018 and expanded portfolio within Punjab and Hyderabad region. CRISIL Ratings believes that ability of the company to grow its JLG portfolio to decent size while maintaining asset quality will remain key monitorable. Further, company’s ability to continue to maintain asset quality within high ticket unsecured business loans will also be closely monitored. |
Analytical Approach CRISIL Ratings has evaluated the standalone business and financial risk profiles of Regency Fincorp. |
Key Rating Drivers & Detailed Description Strengths: * Promoter’s experience in financing space The company has been operational since 2016, though promoters have been in the financing space for more than 20 years now. Mr Gaurav Kumar, managing director of the company, has vast experience in capital market and real estate segment, also worked in banking industry for 13 years. In fiscal 2018, Company began lending in microfinance segment which contribute to around 11% of current loan portfolio, management has plans to grow in this segment. The business benefits from the extensive experience of the board of directors and their strong understanding in financing space and the geographies in which they operate; this helped the company scale up operations and should continue to support the business.
* Adequate capital position Capitalisation is adequate for the current and expected scale of operations, as reflected in networth of Rs 12.3 crore and 2.3 times gearing as on September 31, 2021, compared with Rs 9.5 crore and 2.9 times, respectively, as on March 31, 2021. The adequate capital position is supported regular equity infusion by promoters and steady accretion to reserves. Promoters had infused around Rs 4.9 crore in last 4 years since started operations and has 24.98% shareholding as of September 30, 2021. Also company reporting profits consistently; during last 4 fiscals company reported profits of Rs 1.42 crore cumulatively during fiscal 2018 to fiscal 2021. Additionally, the company raises funds from the investors in the form of Inter corporate deposits (ICDs). In terms of incremental capital infusion, the promoters have plans to infuse equity capital and they are also in talks with one of the private equity player. Nevertheless, overall capital position is expected to remain adequate with steady internal accruals and also gearing level expected below 3-4 times over the medium term.
Weakness: * Short track record, and small scale of operations Regency Fincorp was established in 1993, however current management took over the company in 2016 and full-fledged operations commenced in fiscal 2018. Company's loan portfolio comprises 85% business loan segment, 11% JLG loan and 4% personal loan with total loan portfolio of Rs 38.5 crore as of September 30, 2021. Company has presence in Punjab, Chandigarh, Hyderabad and Surat, however during Covid pandemic, company remain more active in Punjab and Chandigarh. Total Loan portfolio of Rs 38.5 crore as on September 30, 2021 and Rs 34.9 crore as of March 31, 2021, reflect the small scale of operations, the size of the loan book grew at compounded annual growth rate of 90% from Rs 5.6 crore as of March 31, 2018. The scale of operations will likely remain small and the operations geographically concentrated over the medium term.
* Lack of diversity in resource profile The company is highly dependent on funds from investors through ICDs and privately placed non convertible debentures (NCDs). In first half of fiscal 2022, company had raised Rs 0.71 crore in the form of NCD at rate of 10.8% per annum in first half of fiscal 2022 and Rs 0.87 crore in fiscal 2021. The management plans to raise funds from banks. The company's ability to improve its resource profile and raise bank loans will be critical to fund future growth and, hence, will remain a key rating monitorable. |
Liquidity: Stretched As on August 31, 2021, cash and equivalents stood at Rs 1.2 crore. Liquidity would be just sufficient to meet total debt obligation and operating expenses till November 2021. The company largely raises funds through ICDs and privately placed NCDs. In first half of fiscal 2022, company had raised around Rs 0.71 crore in the form of NCD. Promoters will infuse capital in case of requirement. |
Outlook: Stable CRISIL Ratings believes Regency Fincorp will maintain adequate capital position and also will benefit from its experienced management in the near term. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Regency Fincorp (erstwhile Regency Investments Limited), based out of Chandigarh, Punjab, was registered in 1993. The company, which is categorised as a non-government public limited company, was listed on the Bombay Stock Exchange (BSE) in 2016, acquired by Mr Gaurav Kumar, managing director, acquired company through open offer and later increased the shareholding to 24.98% through warrant conversion and preferential allotment. Company has branches mainly at Punjab, offers business loan, JLG Loan and personal loans to around 8,400 customers in Chandigarh, Amritsar, Batala, Ludhiana, Samrala, Fatehgarh sahib, Surat other districts in the vicinity. Business Loan has 85% share in total portfolio outstanding, however now company has plans to reduce the proportion of business loan and more focus will be on microfinance segment. |
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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 08-Dec-2021 in line with the lender-wise facility details as on 08-Dec-2021 received from the rated entity.
Criteria Details
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