| S V Creditline Private Limited | ||
| Rating outlook revised to 'Negative'; rating reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has revised its outlook to 'Negative' from 'Stable' while reaffirming the rating at 'CRISIL BB' on the preference shares of S V Creditline Private Limited (SVCL) |
| Key Rating Drivers & Detailed Description |
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Strengths * Extensive experience of senior management in financial services industry SVCL's board and senior management have rich domain expertise and extensive experience in the fields of microfinance, audit and accounts, taxation, technology, and strategy. The senior management team has been largely stable over the past few years. * Moderate scale and geographic diversity in company's operations As a non-banking finance company-microfinance institution (NBFC-MFIs), SVCL is more diversified than most peers of a similar size, with operations in 9 states and 131 districts; Uttar Pradesh, the largest state, accounted for 43% of its total loan portfolio as on December 31, 2017. Likewise, the top 5 districts accounted for 15% of AUM, lower than most similar CRISIL-rated companies. SVCL has total loan portfolio of Rs 808 crore as on December 31, 2017. Weakness * Modest Capitalisation Capitalisation remains modest for its current and projected scale of operations as reflected in its adjusted networth (excluding deferred tax assets) of Rs.58 crore and adjusted gearing (including off book borrowings) of 15 times as on December 31, 2017. Also, adjusted networth cover for exposure in top 5 districts remains low at 0.5 times as on December 31, 2017. However, promoters have been infusing equity capital at frequent intervals although the quantum of infusion has been very minimal every time. Promoters have infused Rs 10 crore via rights issue in January 2018. CRISIL expects SVCL to raise further equity from promoters and external investors by March 2018, to the extent gearing reduces to 10-11 times. In view of the above, capitalization remains monitorable. * Weak earnings profile SVCL reported a pre-tax loss of Rs 37 crore for first nine months of fiscal 2018 compared to profit of Rs 22.1 crore during fiscal 2017. Earnings profile has weakened primarily on account of high credit costs amounting to Rs.35 crore and also on account of interest reversals subsequent to higher delinquencies. CRISIL believes SVCL's earning profile shall continue to remain under pressure as credit costs are expected to remain high even in fiscal 2019. * Susceptibility to legislative and regulatory risks inherent in the microfinance business Promulgation of the ordinance on microfinance institutions (MFIs) by the Government of Andhra Pradesh demonstrated the vulnerability of MFIs to regulatory and legislative risks. The ordinance triggered a chain of events that adversely impacted the business models of MFIs by impairing growth, asset quality, profitability, and solvency. Furthermore, since the business of these institutions entails lending to the poor and downtrodden sections of society, MFIs will remain exposed to socially sensitive factors, especially relating to interest rates, and, consequently, to tighter regulations and legislation. |
| Outlook: Negative |
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The 'Negative' outlook reflects the decline in earnings and capital position of SVCL. The rating may be 'downgraded' if capitalization is further weakened or asset quality deterioration is more than expected, impacting profitability. The outlook may be revised to 'Stable' if capitalization is strengthened significantly by capital infusion along with improvement in asset quality and profitability. |
| About the Company |
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SVCL, formerly Mantrana Finlease Pvt Ltd, is an NBFC-MFI registered with the Reserve Bank of India. Mr Sunil Sachdeva and Mr Vijay Parekh are the promoters. The company commenced microfinance operations in January 2010. As on December 31, 2017, it had operations over 200 locations, 110 districts and 8 states. SVCL provides loans of Rs 10,000 to Rs 35,000 to under-served households in rural and urban regions, and for income generation purposes to women borrowers under the Joint Liability Group model. SVCL also acts as banking correspondent for Kotak Mahindra Bank ltd ('CRISIL AAA/FAAA/Stable/CRISIL A1+'), ECL Finance ltd ('CRISIL AA/CRISIL PP-MLD AAr/Stable/CRISIL PP-MLD A1+r/CRISIL A1+') and IndusInd Bank Limited ('CRISIL AA+/CRISIL AA/Stable/CRISIL A1+'). SVCL has on book portfolio of Rs 443 crore and off book portfolio of Rs 365 crore as on December 31, 2017. |
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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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| Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release. | |||||||||||||||||||||||||||||||||||||||
| Links to related criteria |
| Rating Criteria for Finance Companies |
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