Detailed Rationale

CRISIL Ratings has assigned its ‘CRISIL BBB-/Stable’ to Rs 20 crore non-convertible debentures issue of Rupeek Capital Private Limited (RCPL; part of Rupeek group). The ratings on other debt instruments and bank loan facilities have been reaffirmed at ‘CRISIL BBB-/Stable/CRISIL A3’.

 
The ratings continue to factor-in comfortable capitalisation of the Rupeek group, as reflected in regular capital infusion by high-pedigree private equity (PE) investors, and asset quality maintained by the group. These strengths are partially offset by limited growth in portfolio, weak profitability and modest resource profile.

 

The group primarily offers gold loans through an online platform and through a door-step service apart from unsecured loans. As on September 30, 2024, it had assets under management (AUM) of Rs 1864.44 crore, of which, Rs 235.77 crore was own-book (offered through RCPL) and Rs 1628.67 crore was off-book — the off-book portfolio (which is a major portion of the AUM) pertains to assets originated by Rupeek Fintech Pvt Ltd (RFPL) through its online platform on behalf of its lending partners. The AUM has grown to Rs 1864.44 Crore and annualised growth rate of 24.95%, during the first six months of fiscal 2025 (from Rs 1,657 crore as on March 31, 2024). The group intends to add a few more banking correspondent relationships and co-lending partnerships which can enable  improvement in growth metrics over the medium term. Given the competitive intensity in the gold loan segment, the ability of the group to scale up both, its own book portfolio and overall, AUM, will remain monitorable.

 

As far as earnings profile of the group is concerned, it has adopted various cost cutting measures to improve its profitability during fiscal 2025. While the group continues to incur losses, the intensity has reduced significantly. During the first six months of fiscal 2025, net loss at the consolidated level including non-cash expenses was Rs 15.1 crore, compared with Rs 115.8 crore for fiscal 2024 and Rs 281 crore for fiscal 2023. The group’s operating expense ratio (operating expenses/average managed assets) reduced to 6.5% during the first six months of fiscal 2025 from 9.3% during fiscal 2024 (15.8% during fiscal 2023). Nevertheless, apart from optimisation of operating costs, the ability of the group to grow own-book portfolio remains critical. Therefore, ability to achieve substantial operating efficiency in order to have sustained profitability will remain a key rating sensitivity factor.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of RCPL and its parent, RFPL. This is because the two companies, together referred to as the Rupeek group, have significant operational, financial and managerial linkages. Additionally, all the equity is raised by the parent, which is then infused into RCPL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Comfortable capitalisation supported by regular infusion by high-pedigree PE investors: As on September 30, 2024, the Rupeek group had a networth of Rs 365.8 crore and gearing of 0.3 time as against Rs 238.7 crore and 0.7 times, respectively, as on March 31, 2024. The capitalisation is supported by regular infusions by investors. The group has raised Rs 1318.9 crore since its inception from a diverse set of PE firms and angel investors. Some of them are Peak XV (earlier called as Sequoia Capital), Accel Partners, GGV Capital, Bertelsmann India, Binny Bansal's BTB Ventures, Vostok Emerging Finance, Highline Investments, Tanglin Venture Partners, KB Investments Co, Kwidnet Holdings, Gemini Investments and Elevation Capital Limited. During the first six months of fiscal 2025, the group raised around Rs 141.7 Crore. Ability to raise capital at favourable valuations will be a rating sensitivity factor.

 

• Adequate asset quality: The GNPA for RCPL stood at 2.98% as on September 30, 2024, from 1.1% as on March 31, 2024 (1.2% as on March 31,2023). The uptick was primarily due to the entity revising its  NPA recognition at 120 days past due (from earlier 150 days past due).Nevertheless, being in gold loan business, the group benefits from managing asset quality risks given highly liquid nature of collateral. In order to ensure the quality/purity of the gold, all the loans originated by the group are first appraised by its loan managers and then by the loan officers of the respective lending partner. This dual appraisal mechanism, combining the strict underwriting norms of banks, helps avoid misappraisal and ensures a tight control on deviations. The group focuses on loans  with a minimum ticket size of Rs 1 lakh that are majorly for working capital purposes rather than for intermittent consumption, to ensure the target segments generate enough returns on the loans deployed to be able to repay the loans. The current average ticket size is Rs 1-3 lakh. The group did not incur any ultimate loss on auction in the first six months of fiscal 2025 and in fiscal 2024. Gold being a secured and resilient asset class, the credit loss on ultimate basis is expected to be negligible considering the requirement to always maintain minimum margins. However, ability to maintain and stabilise asset quality while scaling up the loan portfolio remains monitorable.

 

Weaknesses:

• Weak profitability: The group's business model does not require significant recurring operating costs associated with the traditional brick-and-mortar model. However, the group incurred significant employee cost to set up a management team and online field staff and engage engineers to develop its online gold loan platform. It also incurred substantial marketing expenses in educating customers of its unique business model and for penetrating into new cities. Employee expense comprised 46.4% of the total expense for RFPL for the first six months of fiscal 2025. The group functions through its online platform and has minimal branches in the 63 cities it operates in. It has so far achieved breakeven at the contribution margin level in all cities. With focus on profitability and methods adopted to reduce operating expenses, the group curbed its operating expense (operating expenses/average managed assets) to 6.5% for the first six months of fiscal 2025 from 9.3% during fiscal 2024 (15.8% during fiscal 2023).  This potentially resulted in a reduction of net loss of Rs 15.1 Crore during H1 fiscal 2025 from loss of Rs 115.8crore for the fiscal 2024 (net loss of Rs 281.5 crore during fiscal 2023). Nevertheless, apart from optimisation of operating costs, the ability of the group to grow own-book portfolio remains critical. Therefore, ability to achieve substantial operating efficiency in order to have sustained profitability will remain a key rating sensitivity factor.  

 

• Limited growth in portfolio: The group primarily offers gold loans through an online platform and through a door-step service. As on September 30, 2024, its AUM was Rs 1864.44 crore — Rs 235.77 crore own (offered through RCPL) and Rs 1628.67 crore pertaining to assets originated by RFPL through its online platform on behalf of its lending partners. The AUM has grown to Rs 1864.44 Crore and annualised growth rate of 24.95%,during the first six months of fiscal 2025 (from Rs 1,657 crore as on March 31, 2024). The group is expecting to add a few more banking correspondent relationships and co-lending partnerships in current fiscal which can enable improvement in growth metrics over the medium term. As ramp-up of operations is linked to signing up with more lending partners and is subject to competition, the ability to scale up the portfolio will be monitorable. Also, given the intense competition in the gold loan segment, ability to scale up both, own-book portfolio and overall AUM, remains monitorable.

 

• Modest resource profile: RCPL borrowing profile comprises mainly of NBFCs (39%),   working capital lines and term loans from private and small finance banks (24%) and non convertible debentures (37%).  The average cost of borrowing is 13.1%. Ability to further diversify lenders and funding avenues and raise funds at competitive rates remain monitorable.

Liquidity: Adequate

As on November 30, 2024, the Rupeek group had a comfortable asset-liability maturity profile with positive cumulative mismatches in the up to one year bucket. Unencumbered cash and equivalents stood at Rs 87.41 crore as on November 30, 2024. Liquidity at RCPL is supported by the availability of credit lines from the parent as and when required, and the short tenure of its loans. Furthermore, the company has a policy of maintaining liquidity sufficient to cover six months of interest and principal obligations. As on November 30, 2024, RCPL had scheduled debt obligation of around Rs 71 crore till February 2025.

Outlook: Stable

CRISIL Ratings believes RCPL will continue to benefit from its healthy capitalisation and comfortable asset quality over the medium term.

Rating sensitivity factors

Upward factors:

• Increase in scale of operations while maintaining asset quality, potentially resulting in substantial improvement in group’s profitability
• Asset quality been maintained with 90+dpd remaining below 4% over the medium term

 

Downward factors:

• Steady state gearing above 5 times or inability to raise capital to fund growth
• Any adverse movement in asset quality with 90+dpd (including write offs) beyond 5% on a sustained basis, thereby impacting earnings
• Inability to stem losses or delay in turning profitable

About the Group

Founded in August 2015, RFPL has developed an asset-backed online lending platform providing online gold loans through its model of doorstep pickup and release. The company provides online-based gold loan solutions in partnership with various banks and NBFCs. The company is operational in over 14 states and 63 cities. It started disbursing gold loans through its app, Rupeek, with the lending partner in January 2016.

 

RCPL is a wholly owned subsidiary of RFPL and acquired its NBFC licence in December 2017. RCPL initially disbursed gold loans by itself, using the Rupeek platform and has subsequently been scaling up the business since July 2019 in the form of unsecured loans to gold loan customers of its lending partners.

Key Financial Indicators

As on/for the year ended March 31	Unit	Sep 2024*	2024	2023	2022
Total income	Rs crore	68.4	112.8	97.2	132.4
Total managed assets	Rs crore	2248	1927	1945.3	2501.8
PAT	Rs crore	-15.1	-115.8	-281.5	-364.4
90+ dpd @	%	2.1	2.9	0.8	2.9
Gearing	Times	0.3	0.7	0.6	0.5
Return on Managed assets	%	(1.5)	(5.5)	(12.7)	(16.2)

*Provisional numbers

^@based on 90+dpd, however company follows 120+ dpd as NPA recognition in line with RBI regulations for non-systemic important NBFCs

Any other information: Not Applicable