| De Lage Landen Financial Services India Private Limited | ||||
| Rating Reaffirmed | ||||
| 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 AA+/Stable’ rating on the long-term bank facilities of De Lage Landen Financial Services India Private Limited (DLL India), which continues to be centrally based on S&P's counterparty ratings of 'A+/Stable/A-1' on Cooperatieve Rabobank UA, CRUA Nederland (Rabobank Nederland). CRISIL Ratings has also withdrawn its rating on the Rs 661.37 crore bank loan facilities at the company’s request. The withdrawal is in line with CRISIL Ratings’ withdrawal policy. |
Analytical Approach The rating on the Indian affiliates of global financial institutions (GFIs) by CRISIL Ratings centrally factors in the expectation of support from their ultimate parents. The rating framework for such affiliates considers the following factors: CRISIL Ratings’ assessment of the global operating environment and its impact on the credit risk profiles of GFIs; S&P' ratings on the GFIs; CRISIL Ratings’ translation of S&P’s ratings on the parent into its rating scale; and the standalone credit quality of the respective Indian operations. |
Key Rating Drivers & Detailed Description Strengths:
DLL International BV and its subsidiaries across the globe conduct Rabobank Nederland’s leasing business, which contributes 4% to the parent’s portfolio. Apart from its own branch, Rabobank Nederland uses DLL India as a vehicle for its leasing and lending business in India. DLL India derives strategic and operational expertise from DLL International BV, which has been in the leasing business since 1969. The company's business and risk management policies and systems are based on the policies and systems that the group adopts globally. There is one common director on the boards of DLL India and other DLL entities across Asia. Further, in press releases, Rabobank Nederland has reaffirmed its strong commitment to supporting DLL International BV and its subsidiaries, which carry out the global vendor financing business. Rabobank, through DLL International BV, also provides capital support, and has infused equity of Rs 678.5 crore (Rs 93 crore in current fiscal and Rs 130 crore in fiscal 2021) into DLL India so far.
DLL International BV and Rabobank Nederland share resources. Most of the portfolio of DLL International BV is funded by the shareholder Rabobank. In locations where it is more efficient to obtain funding locally, DLL engages in funding partnerships with high profile local banks. However Rabobank will remain the main source of funding in the coming years. Pursuant to Section 403 of Book 2 of the Dutch Civil Code, Cooperative Rabobank U.A. has assumed liability for the debts arising from the legal transactions of DLL International BV.
Weakness:
However, DLL India has been scaling down its healthcare portfolio since the last couple of years. Further, tractor market has proven to be a difficult sector for DLL India due to small transaction sizes, higher risk profiles of the customers and most of the customers not having sufficient auto-debit penetration and banking habits. As a result, DLL India has also decided to stop new lending in the tractor sector effective December 31, 2020. DLL India now plans to exit the Indian market as and when their existing portfolio runs down completely.
Gross Stage 3 were high at 25.8% as on December 31, 2021 (14.9% as on March 31, 2021). Track record and growth in asset quality management is limited. DLL India is yet to turn profitable. While the management has good domain expertise and a strong track record in the financial services space, ability to manage portfolio performance and profitability is yet to be demonstrated. |
Liquidity: Strong Liquidity is comfortable with positive cumulative mismatch in all the buckets as per the asset liability mismatch statement as on December 31, 2021. The company has debt repayments of Rs 165 crore from February 1, 2022 to June 30, 2022. Against this, cash and liquid investments stood at Rs 190 crore as on January 31, 2022. The company can also borrow from its parent by way of external commercial borrowings to ensure adequate liquidity at all times. |
Outlook: Stable CRISIL Ratings’ believes Rabobank Nederland will continue to support DLL India. The outlook may be revised to 'Positive' if there is an enhanced articulation of support from Rabobank Nederland. The outlook may be revised to 'Negative' in case of a downward revision in S&P's rating on Rabobank Nederland, or a change in Rabobank Nederland’s stance on support extended to DLL India. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the DLL International BV DLL India, a non-banking financial company (NBFC), was incorporated in September 2011. The company got its NBFC license in May 2013. It is wholly-owned by Rabobank Nederland through DLL International BV. DLL India is held by De Lage Landen Asia Participations BV (around 100%) and De Lage Landen Corporate Finance BV (one share), which is held by DLL International BV (parent company of all DLL companies worldwide).
DLL International BV began operations in 1969 and primarily undertakes vendor financing and leasing. Rabobank Nederland derived about 16% of its profitability in fiscal 2021 from the leasing business, carried out by DLL International BV worldwide.
Like DLL International BV, DLL India is mainly involved in vendor financing and had a net loan book of Rs 800 crore as on December 31, 2021. It is present in three segments: agriculture (80.2% of the book as on December 31, 2021), healthcare (17.6%) and construction (2.2%). DLL India has a credit office each in Mumbai and Delhi, and sales executives spread across the country for tractor financing activity.
For fiscal 2021, DLL India reported a loss of Rs 112 crore on total income of Rs 213 crore, against Rs 39 crore and Rs 211 crore, respectively, in fiscal 2020.
For the nine months ended December 31, 2020, it further reported a loss of Rs 46 crore on total income of Rs 124 crore . |
Key Financial Indicators
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Any other information: The company is adequately capitalised, as indicated by networth of Rs 287 crore, and Tier I and overall capital adequacy ratio of 34.1% and 35.3%, respectively, as on December 31, 2021. The capital is expected to remain adequate, supported by regular equity infusion by the parent. The parent has infused Rs 678.5 crore till now and is likely to continue providing financial assistance to support DLL India’s growth plans. Gearing was 1.7 times as on December 31, 2021. |
| 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 04-Apr-22 in line with the lender-wise facility details as on 24-Aug-21 received from the rated entity.
Criteria Details
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