| Sewa Grih Rin Limited | ||||
| Rating reaffirmed at 'CRISIL BBB / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
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| This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated January 08, 2021. |
Detailed Rationale CRISIL rating on the long-term bank loan facility of Sewa Grih Rin Limited (SGRL) continue to centrally factors in adequate capitalisation and funding profile of the company, as well as its experienced management team. These strengths are partially offset by the company’s nascent stage of operations, with a relatively unseasoned portfolio.
From an industry perspective, the nationwide lockdown to contain the spread of the Covid-19 pandemic had impacted disbursements and collections of financial institutions. Intermittent lockdowns and localised restrictions could delay the return of collections to normal level and put pressure on asset quality metrics. Additionally, any change in the behaviour of borrowers on payment discipline can affect delinquency levels. Therefore, the company’s ability to manage asset quality will remain a key monitorable.
On the asset side, SGRL offered moratorium to its borrowers, and around 28% of the portfolio was under moratorium as of August 2020. However, collections have returned to normal levels after the end of the moratorium period. Given that the income streams of the borrowers have been impacted in the current challenging macro environment, sustainability of collections will remain a monitorable. SGRL has received 9 applications for one-time restructuring as on December 31, 2020, which together amounted to around Rs 22 lakh (0.1% of the portfolio).
On the liability side, the Reserve Bank of India had announced regulatory measures under the 'Covid-19 - Regulatory Package', whereby lenders were permitted to grant moratorium on bank loans. SGRL had availed moratorium on a part of its borrowings during this period.
The company had made Covid-19-related provisions of Rs 1.6 crore as on September 30, 2020, which is 0.7% of the portfolio. |
Analytical Approach CRISIL Rating has considered the standalone business and financial risk profile of SGRL. |
Key Rating Drivers & Detailed Description Strengths: * Adequate capitalisation and funding profile The capital position is adequate with networth of Rs 80 crore, in relation to the modest size of the advance book as on September 30, 2020. The capital position benefitted from the latest Series C round of funding of Rs 32 crore through compulsorily convertible preferential shares (CCPS). The funding was completed in early October 2020, despite the overall uncertain investment environment caused by the pandemic. Subsequently, the networth was Rs 112 crore and gearing was 1.4 times. The gearing is expected to increase as the scale improves. However, gearing is expected to be 4-5 times on a steady-state basis.
The company has attracted a strong investor base with Sewa Mutual Benefit Trust (SMBT), Women’s World Bank (WWB), Oikocredit Ecumenical Development Cooperative Society U. A. (Oikocredit), Omidyar Network Fund Inc. (Omidyar), HDFC Holdings, AHI Capital, and HDFC Life, all holding stake in the company.
SGRL has attracted Rs 127 crore in capital since it commenced operations in 2015. Its business model combines lending with social impact - catering to a niche market of informal housing tenure or incomplete property documentation - wherein it assists potential customers to make the property title legally executable. SGRL is expected to continue to benefit from the support of its investors and a further equity raise is planned in mid fiscal 2022.
On the debt side, the US International Development Finance Corporation (DFC) has sanctioned a low cost, 15-year credit line of USD 30 million (Rs 225 crore) in August 2019 at all-in cost of 9.3%. Of this, the company has drawn down Rs 40 crore, with Rs 115 crore available for drawdown. The remaining Rs 70 crore will be available after the incremental equity infusion of Rs 33 crore. This will support SGRL’s growth plans, especially in the current challenging fund raising environment, and it will also help the company to maintain its asset-liability profile. Given the relatively low cost compared to other existing borrowings, it will also support improvement in profitability.
* Experienced management team The current senior management team has been with the company since its inception, and has played a critical role in attracting equity and credit investors through their earlier work connections. Ms Shruti Gonsalves (CEO and MD) has a work experience of around 21 years, and has been associated with various central and state governments and agencies in development finance and financial inclusion. The company also has an experienced second line, which has helped in putting in place adequate systems and processes to manage the inherent risks in the borrower profile
Weakness: * Nascent stage of operations The company commenced its operations around five years back and remains a small player in the affordable housing finance industry, with a loan book of Rs 225 crore as on September 30, 2020. While the current level of delinquencies are low, with gross non-performing assets (NPAs) of 0.23% as on September 30, 2020, the scale-up of portfolio has happened primarily in the last couple of years. The portfolio has witnessed limited seasoning, with short legacy compared to average tenure of 10 years.
Furthermore, SGRL targets women in the low-income group and economically weaker section, who are employed in the informal sector and may lack clear title to the property. Given that the target customer segment has limited financial flexibility in times of distress, with relatively high risk compared to that of traditional home finance companies, the delinquencies are expected to increase from current levels as scale increases and the portfolio seasons. Nevertheless, asset quality should benefit from the granular and secured nature of portfolio with loan-to-value (LTV) ratios of less than 40% for around 90% of the portfolio. However, the ability to manage asset quality will need to be demonstrated over a longer period of time.
Also, the company needs to demonstrate its ability to improve profitability on a sustained basis. The company broke even in fiscal 2020, with net profit of Rs 1.0 crore, compared to a loss of Rs 3.8 crore in fiscal 2019 (profit of Rs 3.3 crore in the half year through September 2020), as the scale increased and operational efficiencies improved. In the company’s target segment, yields remain high but the ability to control credit costs and operating expenses will be the key determinants of profitability, going ahead. At the same time, access to relatively low-cost funding line is expected to support the profitability metrics. |
Liquidity: Adequate SGRL’s structural liquidity statement (excluding unutilised bank lines) had positive mismatches in buckets up to 1 year as on September 30, 2020. The company had overall liquidity cushion of Rs 173 crore in the form of Rs 43 crore in cash balance and Rs 130 crore of unutilised bank lines, as on September 30, 2020, which adequately cover the scheduled debt obligation of Rs 14 crore till end of April 2021. |
Outlook Stable SGRL is expected to maintain adequate capitalisation over the medium term and also benefit from the funding received from DFC. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company SGRL was incorporated in July 2011, and received its housing finance company (HFC) license in January 2015. It operates in the affordable segment and has an average ticket size of Rs 2.65 lakh. The company caters to people employed in the informal sector who have informal property titles, and are residing mainly in urban and peripheral-urban areas. It is headquartered in New Delhi, and operates through 28 branches across 7 states as on September 30, 2020. It now operates under ‘Sitara, a SEWA initiative’ brand.
SGRL is embedded within the Gujarat-based trade union - SEWA network (Self Employed Women Association). SEWA was established in 1972 and aims to organise women employed in the informal sector to provide security of work, income, social equality and food. The company promotes women ownership of assets in line with the philosophy of its promoter.
SGRL is promoted by SMBT (90% of which is held by RNT Associates) which owns 25.5%. Other major shareholders include WWB (19.7%), Oikocredit (18.3%), Omidyar (11.2%), HDFC Holdings (6.7%), AHI Capital (5.9%) and HDFC Life Insurance (5%), after the completion of Series C round of fund raising in early October 2020 through CCPS.
Profit after tax (PAT) was Rs 1.0 crore on total income (net of interest expense) of Rs 21.1 crore in fiscal 2020, against loss of Rs 3.8 crore and Rs 10.7 crore, respectively, in fiscal 2019. In the half year ended September 30, 2020, PAT was Rs 3.3 crore on total income (net of interest expense) of Rs 12.2 crore. |
Key Financial Indicators Key financials
*Included share application money of Rs 32 crore in networth for calculation of gearing. |
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 | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Long Term Loan | Housing Development Finance Corporation Limited | 10 | CRISIL BBB/Stable |
| Long Term Loan | IDFC FIRST Bank Limited | 15 | CRISIL BBB/Stable |
| Long Term Loan | Jana Small Finance Bank Limited | 7 | CRISIL BBB/Stable |
| Long Term Loan | Utkarsh Small Finance Bank Limited | 10 | CRISIL BBB/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 68 | CRISIL BBB/Stable |
This Annexure has been updated on 07-Sep-2021 in line with the lender-wise facility details as on 07-Aug-2021 received from the rated entity.
Criteria Details
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