| Aadhar Housing Finance Limited | ||||
| Ratings Reaffirmed; FD Withdrawn | ||||
| Rating Action | ||||
| ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the commercial paper programme of Aadhar Housing Finance Limited (Aadhar Housing). CRISIL Ratings has reaffirmed and withdrawn its rating on the fixed deposit programme of the company. The Withdrawal is in line with CRISIL Ratings' withdrawal policy.
The ratings continue to factor in the company’s association with Blackstone-group, established presence of the company in the affordable housing finance segment and the comfortable capitalisation metrics. The ratings also reflect the comfortable asset quality metrics, although the portfolio lacks seasoning and the improvement in the earnings profile. |
Analytical Approach CRISIL Ratings has analysed the standalone business and financial risk profile of Aadhar Housing. The rating also factors in the change in ownership to Blackstone and expected benefits from this association. |
Key Rating Drivers & Detailed Description Strengths:
The ratings continue to factor in the company’s association with Blackstone group. As on date, Blackstone holds 98.72% stake in Aadhar Housing. Blackstone had initially infused fresh equity of Rs 800 crore at the time of acquisition in June 2019 and around Rs 500 crore through rights issue in March 2020. CRISIL Ratings notes that Aadhar Housing has filed its draft red herring prospectus for an initial public offering of equity shares comprising of a proposed fresh issuance upto Rs 1,500 crore and an offer for sale by Blackstone group of upto Rs 5,800 crore which has been approved by SEBI. CRISIL Ratings believes that Blackstone group will continue to hold majority stake even post the proposed listing.
In terms of fund raising, post the change in ownership, the company has been able to regularly raise sufficient funds from diversified funding sources through bank loans, NHB refinance, capital market instruments and direct assignment route in fiscal 2022. Of the total debt, funding via the bank loan route was at 82% (including loans from NHB) while capital market instruments constituted balance share of the debt. CRISIL expects the company to continue to be able to raise funds at competitive funding costs going forward as well.
Blackstone has 2 nominee directors on the Board. They exercise strategic and operational oversight over the business of Aadhar Housing. Blackstone has been operating in India for many years and also have strong banking relationships linked to their existing investments in India. Further, they also have global banking relationships. Change in ownership and additional capital infusion has helped Aadhar Housing to gain back the lender and investor confidence and get back to steady state business operations.
The rating also factors in established presence of the company in the affordable housing finance segment. Aadhar Housing is one of the large players among affordable housing finance companies with AUM of Rs 14,052 crore as on Dec 31, 2021. As on Dec 31, 2021, the housing loan portfolio constituted around 82% of the total portfolio, non-housing around 17% and project loan of around 0.01%. The company’s geographical diversity in its disbursements has improved over time. Further the on-book advances as on March 31, 2022 were Rs 11,960 crore as against Rs 10,613 crore as on March 31, 2021. The network spanning 325 branches covers 20 states and union territories in the country as on Dec 31, 2021.
With the company continuing to report profits, the capital position of the company remained comfortable with networth at Rs 3,145 crore and on-book gearing improving to 3.4 times as on March 31, 2022, as against Rs 2,693 crore and 3.9 times respectively as on March 31, 2021. Albeit, the same has improved substantially over Rs 860 crore and 9.5 times respectively as on March 31, 2019. Overall capital adequacy ratio of the company also remained comfortable at 45.41% as on March 31, 2022 compared to 44.08% as on March 31, 2021. While gearing has reduced as on March 31, 2022, it is expected to increase gradually over the next few years; steady state gearing of 5-6 times is likely to be maintained. CRISIL Ratings notes that Aadhar Housing has filed its draft red herring prospectus for an initial public offering of equity shares comprising of a proposed fresh issuance upto Rs 1,500 crore and an offer for sale by Blackstone group of upto Rs 5,800 crore which has been approved by SEBI which will further enhance the capitalisation metrics.
Weaknesses:
The asset quality metrics for the company have remained comfortable with reported gross non-performing assets (NPAs) on Loan book at 1.52% as on March 31, 2022 (1.29% as on March 31, 2020). Collection efficiencies (including overdue collections) too have improved after dropping post the 2nd Covid-19 wave to 100% as on Dec 31, 2021 and have remained at a similar level over the past couple of quarters. This stems after a drop in the collection efficiencies to around 91% in April 2021.
However, the company has restructured Rs 443 crore, which constitutes 3.90% of the portfolio, as on Dec 31, 2021 and the performance of this portfolio remains a key monitorable. Further, the AUM for the company has grown rapidly in the last few years to Rs 14,052 crores as on Dec 31, 2021 as against Rs 11,432 crores as on March 31, 2020 and therefore the sustenance of the asset quality metrics will be demonstrated over the medium term.
With improvement in asset quality metrics and an improvement in the cost of borrowings, the earnings profile has shown improvement with Return on Assets (ROA) of 3.2%* in fiscal 2022, compared to 2.6%* for fiscal 2021. The cost of borrowings improved to 7.2%* as on March 31, 2022, as against 8.2%* as on March 31, 2021. With yield remaining at similar levels as last year, the net interest margin (NIMs) increased to 4.6%* as on March 31, 2022, as against 3.9%* in the previous fiscal. The overall profitability was further supported by low credit costs which stood at around 0.3%* as on March 31, 2022, as against 0.4%* in the previous fiscal.
Net interest margin are at 4.6%* (including off-balance sheet advances), due to focus on salaried customers, who have relatively stronger credit profiles, in comparison to the self-employed segment, and hence, the interest rate is relatively lower. The company has also focused on improving the operating expense ratio in fiscal 2022. Further the company has taken several steps such as usage of CPUs (Central Processing Units) for sanctions process and increased usage of technology in the mid office which may support the improvement in operating expenses going forward. Sustainability of ROMA going forward will be a key monitorable and rating sensitivity factor. |
Liquidity: Strong Aadhar Housing’s liquidity position is strong. As per Asset Liability Maturity (ALM) statement as on March 31, 2022, the company has cumulative positive gaps across all buckets. As on March 31, 2022, the company had a total cash and equivalents (excluding unutilized bank lines) of Rs 1708.75 crore which provides a cover of over 1.0x for the debt repayments(including interest) over the 6 months till September 2022. |
Outlook: Stable CRISIL Ratings believes that Aadhar Housing will maintain its strong market position in the affordable housing business. Blackstone is also expected to maintain their significant majority ownership in, and extend required support to, Aadhar Housing in case of any exigency. |
Rating Sensitivity factors Downward Factors
|
About the Company Aadhar Housing was set up in 1990 Currently, Blackstone group owns 98.72% in the company.
The company focuses on the lower- and middle-income segment, specifically comprising the salaried, self-employed, and agricultural income-based population. The loans have an average ticket size of ~ Rs 8.6 lakh.
In fiscal 2022, net profit was Rs 445 crore on total income (net of interest expenses) of Rs 967 crore, against Rs 340 crore and Rs 760 crore, respectively, in the previous fiscal. |
Key Financial Indicators
|
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)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
|