| Standard Chartered Investments and Loans India Limited | ||||
| Ratings reaffirmed at 'CRISIL AAA/Stable/CRISIL A1+' | ||||
| Rating Action | ||||
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| 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 bank loan facilities, debt instruments and commercial paper of Standard Chartered Investments and Loans (India) Limited (SCILL).
The ratings continue to factor in support from Standard Chartered Bank (SCB; rated 'A/Stable/A-1' by S&P Global Ratings). CRISIL's believes that SCILL will continue to be held by SCB and that timely support, if required, will be made available to SCILL by SCB. This is because of SCILL's high strategic importance to, and strong linkages with, SCB’s India operations (SCB India). |
Analytical Approach CRISIL Ratings’ credit rating on the Indian affiliates of global financial institutions (GFIs) centrally factor in the strong expectation of support from their parent. The rating framework for such affiliates takes into account the following factors: assessment of the global operating environment and its impact on the credit risk profiles of GFIs; S&P Global’s ratings on GFIs; translation of S&P Global’s ratings on the parent entity into CRISIL Ratings’ credit rating scale; and the standalone credit quality of the respective Indian operations. For SCILL, CRISIL has factored in the strong expectation of support from its parent, SCB. |
Key Rating Drivers & Detailed Description Strengths: * Expectation of continued strong support from the parent, Standard Chartered Bank SCILL is a wholly owned subsidiary of Standard Chartered Bank, UK. The ratings centrally factor in the strong support from the parent, SCB UK. SCILL is an independent entity managed and governed by its Board of Directors with all the business and administrative decisions delegated to the CEO by its Board. SCILL’s Board of Directors are comprised of SCILL CEO, independent directors and representatives from SCB. Further SCB provides guidance to SCILL’s management in the company’s strategic decision-making. SCILL’s risk management policies, systems and processes are aligned with Standard Chartered group’s global policies. Besides being well capitalised, SCILL also sources funds from other banks and financial institutions and it has credit line arrangement with SCB India to be used only in case of a contingency. SCB UK’s ownership ensures that SCILL will remain adequately capitalised. CRISIL believes that the strategic importance and 100% ownership of SCILL by SCB UK implies a strong moral obligation on the parent to continue to support its subsidiary both on an ongoing basis and in times of distress.
* Healthy capitalisation SCILL’s capitalisation is healthy with networth of Rs 963 crore and low gearing of 1.9 times as on December 31, 2020 (Rs 911 crore and 1.7 time as on March 31, 2020). Gearing is expected to increase gradually with increase in loan portfolio, but will remain below 5 times over the medium term. Given the increasing importance of SCILL to the SCB, CRISIL believes SCB will infuse equity capital in the company to support its growth plans over the medium term as required. Furthermore, healthy capitalisation continues to provide a cushion against any asset-side risks.
Weakness: * Portfolio performance sensitive due to limited client penetration; however improvement seen in this area SCILL’s portfolio performance is sensitive due to limited nature of granularity of its loan exposures of Rs 2,524 crore as on December 31, 2020. The top 10 exposures constitute 42% of the loan book; although this has reduced significantly from 53% as on March 31, 2019. The loan book remains diversified in respect to sectoral exposures and with increase in its retail loan book, the client penetration is set to improve which would address the portfolio sensitivity. There are Nil NPAs as on December 31, 2020. However, there is one account constituting 3.9% of the loan book, which was current before it opted for one-time restructuring under RBI’s circular on Resolution Framework for Covid-19-related Stress, issued in August 2020. The restructuring plan for the said account has been approved under guidance of above said circular in March 2021 and has been duly implemented by all creditors.
In terms of collections, the company has performed fairly well, even in the period of lockdown. The collection efficiency for book remained 100% or above across the year. Profitability may be adversely impacted if incremental stress is witnessed in the loan portfolio and as a result, asset quality and profitability performance needs to be demonstrated through cycles. While the company plans to diversify its portfolio mix by increasing its retail and SME business portfolio, till this scales up, asset quality will be key monitorable. |
Liquidity: Strong Liquidity profile of the company remains adequate. Asset liability maturity (ALM) profile for SCILL is adequate with cumulative positive gaps in upto 1 year bucket as per the ALM profile as on March 31, 2021. As on March 31, 2021 the company had upcoming repayments of around Rs 345 crores (primarily comprising of CP/ICD obligations) till May 2021 against which the company had cash and equivalents of ~Rs 71 crore and unutilised bank lines of Rs 730 crores, which includes Rs 600 crores committed line from SCB India. Due to the inherent nature of loan book, SCILL also benefits from high prepayments. Nevertheless, in case of any liquidity exigency, CRISIL Ratings expects the parent to arrange for required funding support. |
Outlook Stable CRISIL Ratings believes that SCILL will continue to benefit from the support that it receives from its parent, Standard Chartered Bank. |
Rating Sensitivity factors Downward Factors
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About the Company SCILL is a wholly-owned subsidiary of SCB. SCILL was incorporated in 2003 to leverage the Standard Chartered group’s sizeable Indian operations in the financial services segment. The company is registered with the Reserve Bank of India as a non-deposit-taking, systemically-important, non-banking financial company. It primarily focuses on segments such as promoter financing, lease rental discounting, and other secured corporate loans. The company plans to diversify its portfolio mix by increasing its retail and SME business portfolio over the medium term.
SCILL’s risk management policies, underwriting standards and procedures are in line with SCB’s global policies. The SCILL risk team consist of seasoned professionals with average experience of over 15 years in the retail and corporate segment. The governance management in Risk is through the Credit and Risk committee which is conducted at regular interval and is chaired by SCILL Directors and Independent Directors. |
Key Financial Indicators
*Unaudited as per IGAAP |
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)
^ Yet to be issued |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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