| SMFG India Credit Company Limited | ||||||||||
| 'CRISIL AAA/Stable' assigned to Non Convertible Debentures | ||||||||||
| Rating Action | ||||||||||
| ||||||||||
| ||||||||||
| The common independent director on CRISIL Ratings Limited and SMFG India Credit Company Limited boards did not participate in the rating process or in the meeting of the rating committee, when the rating for securities of SMFG India Credit Company Limited was discussed. This rating was also not discussed in the meeting of CRISIL Ratings’ Board of Directors. | ||||||||||
| 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 assigned its ‘CRISIL AAA/Stable’ rating to Rs.1000 crore non convertible debentures of SMFG India Credit Company Limited (SMICC) and has reaffirmed its ‘CRISIL AAA/CRISIL PPMLD AAA/Stable/CRISIL A1+’ ratings on the existing bank facilities and debt instruments.
SMICC and its wholly owned subsidiary, SMFG India Home Finance Company Limited (SMHFC), are together referred herein as SMICC group.
The ratings continue to factor in strong support from the parent, SMFG (rated ‘A-/Stable’ by S&P Global) on an ongoing basis and in the form of need-based equity/debt capital support and operational/managerial synergies. SMICC is a wholly owned subsidiary of SMFG.
CRISIL Ratings understands that SMFG is committed to providing equity capital or liquidity to support SMICC group’s growth plans or in the event of any exigency. The ratings also reflect the comfortable capitalisation profile and the scale up in the portfolio. However, the asset quality remains vulnerable to slippages given the borrower profile and earnings profile also remains modest |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the consolidated business and financial risk profiles of SMICC and its wholly owned subsidiary, SMHFC, together referred herein as SMICC group. The companies have strong operational and financial linkages, common senior management, and shared brand. The ratings also continue to factor in strong support from SMFG, the parent, given the strategic importance of SMICC group to SMFG, full ownership, complete management control and shared brand name.
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:
The rating factors in expectations of continued support in the form of both equity and debt from SMFG (rated ‘A-/Stable’ by S&P Global) on an ongoing basis and in the event of any exigency. SMFG has senior level representation on the Board and various committees of SMICC group and is involved in key decisions taken by the company. India continues to be one of the focus markets for SMFG Group, with the group tapping into the Indian market through its presence via Sumitomo Mitsui Banking Corporation (SMBC) which is more entrenched towards large corporate lending, and SMICC, wherein the latter allows SMFG to build a comprehensive financial service offering and also cater to the retail segment, thus increasing its clientele base on a global demographic.
On a standalone basis, the networth of SMICC continues to witness an uptrend improving to Rs 7,226 crore as on September 30, 2024, as compared to Rs 5,722 crores as on March 31, 2024, driven by healthy internal accruals during the period. The group had also infused capital of Rs. 1300 crore in SMICC in April 2024 leading to an increase in net worth of the company. Gearing stood at 5.2 times as on September 30, 2024, as compared to 5.6 times as on March 31, 2024. In terms of capital adequacy ratio (CAR), as on September 30, 2024, SMICC’s overall CAR stood at 18.6% with a tier 1 CAR at 15.4%, well above the regulatory requirement.
At a group level also, the networth stood at Rs 5,709 crore as on March 31, 2024, with gearing at 6.8 times as on March 31, 2024 (6.6 times as on March 31, 2023).
The group follows a conservative capitalisation policy by maintaining a buffer over the regulatory capital requirement based on a stress test. CRISIL Ratings does not expect any change in the capital philosophy of the group, and capitalisation metrics is expected to continue to remain at healthy levels going forward.
The AUM of the group increased by ~19% (annualized) to Rs 49,788 crore as on September 30, 2024, as against Rs 45,441 crore as on March 31, 2024. The growth was broad based across segments with personal loans (including digital lending) constituting 44% of the AUM followed by loans against property (LAP, 29%), housing (12%) and the rest towards a mix of secured and unsecured product categories. Consequently, at the consolidated level, the share of unsecured loans stood at 54% as on September 30, 2024.
Weaknesses:
The group’s gross Stage 3 stood at 2.5% as on March 31, 2024, as compared to 3.2% as on March 31, 2023. On a standalone basis, headline asset quality metrics of SMICC improved with Gross Stage 3 at 2.2% as on September 30, 2024, as compared to 2.6% as on March 31, 2024 (3.3% as on March 31, 2023).
Over the years, risk management processes and data analytics capability have been strengthened. Underwriting norms and monitoring mechanisms have been reinforced. The unsecured lending business has also been supported through investments in risk analytics and technology. Underwriting and collection norms have been tightened based on portfolio performance trends and early warning indicators. Nevertheless, the ability to manage collections and improve asset quality metrics while the portfolio scales up remains a key monitorable.
On a standalone basis, return on managed assets (RoMA) stood at 1.1% (annualized) for first half of fiscal 2025 as compared to 1.6% for fiscal 2024.
PAT of the group stood at Rs 670 crore for the same fiscal 2024 as compared to Rs 710 crores for fiscal 2023, with RoMA of 1.4% and 2% respectively.
The earnings profile for SMFG India group is supported by a large proportion of high-yield businesses and competitive borrowing costs. Group's borrowings profile and costs should continue to benefit both directly and indirectly leveraging SMFG’s global presence. The ability of the group to improve profitability whilst maintaining credit costs remains a key monitorable. |
Liquidity: Superior The liquidity profile of the group remained superior owing to the presence of an unencumbered liquidity surplus of Rs. 5,679 crores in the form of cash and short-term investment balance as on November 30, 2024. This was further supported by unutilized bank lines amounting to Rs. 6,226 crore and inflows from advances. Against the same, the group had total instalment repayments amounting to Rs 10,020 crore till May 2025. The diversified lender base, low reliance on short term funding (commercial paper) and well-matched asset-liability profile to minimize tenor and refinancing risks provide adequate support. |
Outlook: Stable CRISIL Ratings believes SMICC group will remain strategically important to, and continue to receive support from, SMFG, and will sustain its growth momentum while maintaining its healthy financial risk profile |
Rating Sensitivity Factors Downward Factors:
|
About the Company SMICC was formed in December 2005 through the acquisition of Dove Finance (DF) by Asia Financial Holding Pte, Singapore (through its investment arm, Angelica Investment Pte Ltd). After the acquisition, the name was changed to First India Credit Company Ltd, which was then renamed to Fullerton India Credit Company Ltd deriving its name from the parent.
SMFG had acquired 74.9% stake in the company on November 30, 2021, and completed the acquisition of remaining 25.1% stake on March 6, 2024, thus making it a wholly owned subsidiary. Product offerings include secured products which comprise primarily of mortgages/loans against property, and commercial vehicle loans. The unsecured product offerings comprise personal loans and rural group loans. The company operates through 1006 distribution points. |
Key Financial Indicators: Key Financial Indicators (SMICC - Standalone):
^based on total managed assets; annualised #as per CRSIL adjusted calculation, Direct Assignment is included in Borrowings for calculation of Adjusted Gearing
Key Financial Indicators: (SMICC- Consolidated):
^based on total managed assets #as per CRSIL adjusted calculation, Direct Assignment is included in Borrowings for calculation of Adjusted Gearing |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s
^Yet to be issued |
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
|
Criteria Details
|