CRISIL, the credit rating agency, has assigned “A+/Stable” credit rating for Asirvad Microfinance Ltd, which is the highest rating given by CRISIL to a microfinance company. The revised rating is applicable to the long-term bank facility and non-convertible debentures of the company and for the commercial paper program of Asirvad, CRISIL has assigned its ‘CRISIL A1+’ rating.
The rating reflects the new management and financial support that Asirvad gets from its parent company Manappuram Finance, which is rated AA-/Stable/CRISIL A1+. The rating factors in adequate capitalisation and healthy profitability. The rating strengths are partially offset by risks relating to geographical concentration and rapid growth in portfolio, and risks from regulatory and legislative changes in the microfinance sector.
According to Crisil, Asirvad is adequately capitalised for its expected scale of business. Net worth and gearing (including securitisation as part of debt) were Rs 2.3 billion and 3.9 times as on March 31, 2016.
The networth has increased from Rs 1.1 billion a year earlier, backed primarily by infusion of capital of around Rs 1 billion by Manappuram Finance during the year, in addition to higher accrual.
Additional infusions of equity are expected to support capital adequacy over the medium term. The gearing, adjusted for off-balance sheet portfolio, should remain around 6 times. "Profitability is expected to remain healthy, underpinned by ramp-up in scale of operations and fee-based income," it said.
The Manappuram group has taken over 90% of the stake in Asirvad Microfinance recently in order to scale up its business beyond gold loans.[category, finance]