Rating Rationale
October 24, 2024 | Mumbai
Emerald Finance Limited
'CRISIL BB+/Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.30 Crore
Long Term RatingCRISIL BB+/Stable (Assigned)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its 'CRISIL BB+/Stable’ rating to the proposed long-term bank facilities of Emerald Finance Ltd (Emerald). The rating factors in the adequate capitalisation and comfortable earnings profile of the company. These strengths are partially offset by the small scale of operations with a short track record in the early wage access (EWA) segment and the modest resource profile.

 

Emerald has raised Rs 10 crore as equity capital during fiscal 2025. As a result, networth and gearing stood at Rs 61.5 crore and 0.3 times, respectively, as on September 30, 2024, vis-a-vis Rs 47.9 crore and 0.3 times, as on March 31, 2024.

 

On the profitability front, return on managed assets (RoMA) stood at 7.1% as on March 31, 2024, with absolute profit being Rs 4.1 crore during the same period. Operating expenses remain high as the company is in its growth phase and focused on short-tenor loans. The ability to manage the operating cost along with scale up in the portfolio is a key monitorable.

 

The portfolio remained small at Rs 55 crore as of March 31, 2024 (Rs 43 crore as of March 2023). As on September 30, 2024, it was around Rs 65.8 crore. Loans to the MSME (micro, small and mid-sized enterprises) segment forms 99% of the book. Furthermore, the portfolio lacks seasoning and risk associated with the unsecured segment is relatively higher. Ability to manage asset quality as the portfolio scales would be a key monitorable.

Analytical Approach

To arrive at the ratings, CRISIL Ratings has evaluated the consolidated business and financial risk profiles of Emerald and Eclat Net Advisory Pvt Ltd (81% held subsidiary of Emerald).

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Adequate capital position supported by healthy accretion to reserves: The company is well-capitalised for the current scale of operations, supported by the ability of the promoters to raise capital at regular intervals. The capitalisation profile is comfortable for the current scale of operations with networth and gearing at Rs 61.5 crore and 0.3 times, respectively, as on September 30, 2024, against Rs 47.9 crore and 0.3 times as on March 31, 2024. The company has raised Rs 10 crore by issuing share warrants to Investi Global Opportunity Fund based out of Mauritius, during fiscal 2025. However, the promoters will retain the majority stake in the company. Ability to raise equity capital at regular intervals and maintain gearing at comfortable levels will be a key rating sensitivity factor.

 

  • Comfortable earnings profile: The earnings profile remains stable with the company reporting profit for the past seven years. Emerald has diversified its revenue streams by engaging in the lending and direct sales agent business. The company reported profit after tax (PAT) of Rs 4.1 crore translating into RoMA of 7.1% in fiscal 2024, as against Rs 3.6 crore and 7.4%, respectively, in the previous fiscal, and PAT of Rs 3.8 crore and RoMA of 10.3% (annualised) for the first six months of fiscal 2025. Operating expenses have been high due to short tenor loans. Operating expenses for fiscal 2024 stood at 10.4%, but reduced to 8.1% (annualised)in the first half of fiscal 2025. The ability to sustain the reduction in operating expenses and maintain profitability is a key monitorable.

 

Weaknesses:

  • Small scale of operations with a limited track record: Emerald started lending to MSMEs in 2015 and has experienced significant growth only over the last two years. The company has been offering two products: unsecured loans and EWA loans. The portfolio was small at Rs 55 crore as on March 31, 2024 (Rs 43 crore as on March 31, 2023) and rose to Rs 65.8 crore as on September 30, 2024. MSME forms bulk of the portfolio (99%). However, the portfolio lacks seasoning and remains exposed to relatively higher risk associated with the unsecured segment. The ability of the company to manage its asset quality as the portfolio scales remains is a key monitorable.

 

  • Exposure to high chunkiness in the loan portfolio: The loan portfolio faces high degree of chunkiness (concentration) in the MSME segment (which is unsecured in nature). The company has been offering loans with relatively higher ticket sizes. As a result, the top 5 and top 10 loans accounted for around 11% and nearly 20% of the loan book, respectively, as on September 30, 2024. This could pose asset quality risk in case of any top exposures slipping to overdues or non-performing assets. These issues will attract higher provisioning and erode overall profitability. While the company has been able to maintain asset quality with NPAs at less than 0.5% during the last two years, ability to maintain the same, especially in light of high concentration, is monitorable.  

Liquidity: Adequate

As on September 30, 2024, Emerald had cash and cash equivalents of Rs 5.9 crore and unutilised bank lines of Rs 5 crore. It had liquidity cover (excluding unutilised term loans) of 1.8 times for the three months through December 31, 2024.

Outlook: Stable

CRISIL Ratings believes Emerald will remain adequately capitalised and continue to benefit from the extensive experience of its promoters and management

Rating Sensitivity Factors

Upward factors:

  • Reduction in chunkiness (concentration) in portfolio 
  • Strong capitalisation metrics with gearing below 2 times and scale up in operations to over Rs 150 crore
  • Sustenance of asset quality at the current level while growing the portfolio

 

Downward factors:

  • Weakening of asset quality, with NPAs remaining over 2%, leading to higher credit cost
  • Moderation in capitalisation metrics with significant increase in gearing while scaling up the portfolio

About the Company

Incorporated in 1983, Emerald is a Chandigarh-based non-deposit taking, non-banking finance company (NBFC). The company received its NBFC license in March 2015 and subsequently shifted its loan sourcing business to its subsidiary Eclat Net Advisors Pvt Limited. The promoter, Mr Sanjay Aggarwal has over 27 years of experience in project finance, loan syndication and capital restructuring. The company started offering MSME and personal loans and then subsequently diversified into the EWA segment.

 

Till date, the company has tied up with more than 20 corporate entities and government bodies to extend its product offering. The risk involved in the EMA segment is lower as the amount to be paid back by the employee is deducted from salary and employees need to serve a notice period of one month prior to leaving the organisations that Emerald is associated.

Key Financial Indicators

Particulars

Unit

September 2024/

H1 fiscal 2025

2024

2023

Total assets

Rs crore

81.6

64.9

52.0

Total income

Rs crore

9.4

13.4

11.6

Profit after tax

Rs crore

3.8

4.1

3.6

GNPA

%

0.0

0.49

0.48

Gearing

Times

0.3

0.3

0.1

Return on managed assets

%

10.3*

7.1

7.4

*annualised

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA  Proposed Long Term Bank Loan Facility  NA  NA  NA  30 NA  CRISIL BB+/Stable 

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Eclat Net Advisory Pvt Ltd

Full

Operational, financial and managerial linkages
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 30.0 CRISIL BB+/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Long Term Bank Loan Facility 30 Not Applicable CRISIL BB+/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Finance Companies
CRISILs Criteria for Consolidation

Media Relations
Analytical Contacts
Customer Service Helpdesk

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Ajit Velonie
Senior Director
CRISIL Ratings Limited
B:+91 22 3342 3000
ajit.velonie@crisil.com

Malvika Bhotika
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
malvika.bhotika@crisil.com

Parul Garg
Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Parul.Garg2@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).

CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").

For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') provided by CRISIL Ratings Limited ('CRISIL Ratings'). For the avoidance of doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for use only within the jurisdiction of India. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings provision or intention to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

The report is a statement of opinion as on the date it is expressed, and it is not intended to and does not constitute investment advice within meaning of any laws or regulations (including US laws and regulations). The report is not an offer to sell or an offer to purchase or subscribe to any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way.

CRISIL Ratings and its associates do not act as a fiduciary. The report is based on the information believed to be reliable as of the date it is published, CRISIL Ratings does not perform an audit or undertake due diligence or independent verification of any information it receives and/or relies on for preparation of the report. THE REPORT IS PROVIDED ON “AS IS” BASIS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, CRISIL RATINGS DISCLAIMS WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR OTHER WARRANTIES OR CONDITIONS, INCLUDING WARRANTIES OF MERCHANTABILITY, ACCURACY, COMPLETENESS, ERROR-FREE, NON-INFRINGEMENT, NON-INTERRUPTION, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR INTENDED USAGE. In no event shall CRISIL Ratings, its associates, third-party providers, as well as their directors, officers, shareholders, employees or agents be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

The report is confidential information of CRISIL Ratings and CRISIL Ratings reserves all rights, titles and interest in the rating report. The report shall not be altered, disseminated, distributed, redistributed, licensed, sub-licensed, sold, assigned or published any content thereof or offer access to any third party without prior written consent of CRISIL Ratings.

CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains or its associates. Ratings are subject to revision or withdrawal at any time by CRISIL Ratings. CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors.

CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For more detail, please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the Securities and Exchange Board of India regulations (and other applicable regulations, if any), are made available on its websites, www.crisilratings.com and https://www.ratingsanalytica.com (free of charge). CRISIL Ratings shall not have the obligation to update the information in the CRISIL Ratings report following its publication although CRISIL Ratings may disseminate its opinion and/or analysis. Reports with more detail and additional information may be available for subscription at a fee.  Rating criteria by CRISIL Ratings are available on the CRISIL Ratings website, www.crisilratings.com. For the latest rating information on any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisilratings.com/en/home/our-business/ratings/credit-ratings-scale.html