| SBI Global Factors Limited | ||||
| Ratings reaffirmed at 'CRISIL AAA / Stable / CRISIL A1+ ' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the existing debt instruments of SBI Global Factors Limited (SBIGFL).
The ratings continue to factor SBIGFL's strategic importance to, and the strong moral obligation of, parent State Bank of India (SBI; rated 'CRISIL AAA/CRISIL AA+/Stable'), to support the company. The rating also factors in comfortable capital position. These rating strengths are partially offset by modest asset quality and profitability. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has assessed the standalone credit risk profile of SBIGFL and continues to factor in strong managerial and financial support from the parent SBI. CRISIL Ratings believes SBIGFL, will, in case of exigencies, receive distress support from its parent for timely repayment of debt obligations, considering the strategic importance of the entity and high moral obligation on account of majority shareholding and shared brand name. |
Key Rating Drivers & Detailed Description Strengths: Expectation of strong support from SBI: The ratings continue to be centrally based on SBI's strong moral obligation to support SBIGFL, given its complete ownership (100% stake as on March 31, 2023), shared brand, and management control. SBI continues to provide strong management, operational, and financial support to the company. SBIGFL, the leading market player in the factoring business, is likely to operate independently as a key factoring arm of the group and continue to build market for the business in India. The company will also continue to focus on increasing its share of non-factoring business which should improve its business risk profile.
SBIGFL has received multiple rounds of capital from SBI in the past and the latter is expected to remain a majority shareholder in the company. SBIGFL also derives support from SBI in the form of bank lines, this limit stood at Rs 1251 crore as on May 31, 2023. Besides, SBIGFL's board has representation from SBI, and the parent is actively involved in strategic decision making. The company's senior management team continues to be on deputation from SBI. Any significant decline in SBIGFL's strategic importance to, or majority ownership by, SBI, and in support from the parent will remain a key rating sensitivity factor.
Comfortable capital position: SBIGFL had tier-1 and total capital adequacy ratio (CAR) of 27.08% and 34.37% respectively, as on March 31, 2023 (26.59% and 34.74% respectively, as on March 31, 2022). Networth was Rs. 408 crore and gearing was low, at 2.1 times as on March 31, 2023. Over the medium term, the gearing is expected to remain within 2-3 times. Moreover, Networth coverage for net non-performing assets (NPAs) was comfortable, at 5829 times as on March 31, 2023.
Weakness: Modest, though improving, asset quality and profitability: The gross NPA ratio has reduced significantly over the recent past. It declined to 2.72% on March 31, 2023, from 7.05% as on March 31, 2022, supported by write-offs of Rs. 52 crore (Rs 61 crore in fiscal 2022). Slippages to NPAs (as % of Funds in Use) stood at 0.38% in fiscal 2023 (1.49% in fiscal 2022) and recoveries have remained moderate. Asset quality will remain a key monitorable in the medium term. The company's ability to contain incremental slippages and recover from NPAs will remain a key monitorable.
With gradual improvement in asset quality, profitability has also seen an uptick in recent years. For fiscal 2023, SBIGFL reported a PAT of Rs 31.2 crore as against 25.3 crore in fiscal 2022. The company's ability to maintain the improvement in profitability supported by adequate provision coverage ratio (~99.79% as on March 31, 2023) and growth in business volumes in both factoring and non-factoring business, will remain a key monitorable. |
Liquidity : Superior The asset liability management profile was comfortable as on March 31, 2023, with positive cumulative mismatches in the bucket up to one year. The company has sufficient unutilized bank lines which stood at Rs 1198 crore as on May 31, 2023 and also expects inflows of Rs 882 crore until August 31, 2023. This is enough to cover the upcoming Rs 710 crore repayments until August 31, 2023. The total borrowings were Rs 835 crore, with bank borrowings constituting ~75% of this base as on March 31, 2023. Around 68% of the total sanctioned bank lines is from the parent, SBI. The company has the flexibility to get additional lines from SBI if required. |
Outlook Stable CRISIL Ratings believes SBIGFL will continue to receive strong managerial and financial support from the parent SBI. |
Rating Sensitivity factors Downward factors |
About the Company Incorporated in 2001, SBIGFL is a registered non-banking financial company that offers domestic factoring, export and import factoring, and discounting of bills under letter of credit services to the small-and-medium enterprise sector. As on March 31, 2023, factoring business outstanding stood at 79% (outstanding as on March 31, 2022, stood at 91%) while gold pool business outstanding was 16% as on March 31, 2023 (2% as on March 31, 2022). |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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