| Fasttrack Housing Finance Limited | ||||
| Rating reaffirmed at 'CRISIL BBB / Negative' | ||||
| 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 BBB/Negative’ rating on the long-term bank facilities of Fasttrack Housing Finance Ltd (FHFL; part of the Investment Trust of India Ltd [ITI] group).
The outlook remains ‘Negative’ as the group’s revised strategy is yet to translate into sustainably improving asset quality and earnings performance.
The rating reflects the expectation of support from the ITI group and FHFL’s adequate capitalisation. These strengths are partially offset by a weak borrower profile, small scale of operations, and geographical concentration in revenue.
FHFL’s asset under management (AUM) reduced to Rs 97 crore as on December 31, 2021, from Rs 114.0 crore as on March 31, 2021. After the RBI’s notification dated August 25, 2021, to recognise housing finance companies (HFCs) with assets over Rs 100 crore as ‘Financial Institutions’ under SARFAESI Act, 2002, FHFL has experienced better response from borrowers against collection efforts. Gross non-performing assets (GNPAs) were 3.1% as on March 31, 2022, (3.5% as on December 31, 2021) from Rs 3.3% as on March 31, 2021.
While, as on December 31, 2021, FHFL restructured around Rs 15 crore of restructured loans (15.5% of the book) under the Reserve Bank of India (RBI) Resolution Framework 1.0 and 2.0 for Covid-19-related Stress, delinquencies were low at around 0.23% in the restructured book as on March 31, 2022. Nevertheless, ability to manage collections and asset quality in fiscal 2023 will be a key monitorable. |
Analytical Approach CRISIL Ratings has analysed the business and financial risk profiles of FHFL on a standalone basis, and has factored in the financial, operational, and management support expected from the ITI group on account of strong linkages between the company and the group. |
Key Rating Drivers & Detailed Description Strengths: Benefits from linkages with the ITI group FHFL is strategically important to the ITI group in scaling up its retail housing finance business. Mr Sudhir Valia, the promoter and major shareholder of the ITI group, is a director at FHFL and Mr Chintan Valia (son-in-law of Mr Sudhir Valia) manages the HFC’s business. Further, treasury operations at FHFL are run in coordination with its holding company, Lakshdeep Investments and Finance Private Ltd (Lakshdeep), which is also controlled by Mr Sudhir Valia. ITI group promoter and promoter-controlled companies have infused around Rs 50 crore of equity and extends unsecured loans of around Rs 61 crore to FHFL. Hence, ITI group is likely to continue providing managerial, operational, and financial assistance to FHFL as and when required.
Adequate capitalisation Capitalisation is adequate with networth of Rs 56.8 crore and comfortable gearing of 1.1 times as on December 31, 2021, as against Rs 55 crore 1.4 times, respectively, as on March 31, 2021. Promoters had last infused Rs 32.4 crore of capital in FHFL in fiscal 2019. Given is expected to remain comfortable at under 3 times over the medium term.
Weakness: Weak borrower profile A significant proportion of FHFL’s lending is to customers engaged in informal businesses. These borrowers have relatively weak credit risk profiles because of the volatile nature of their incomes and employment in unorganised segments. Additionally, borrowers in this category have limited or no access to formal housing finance due to the lack of any credit history, absence of formal pay slips evidencing income, and limited documentation regarding property, particularly in semi-urban/rural areas.
After the RBI’s notification dated August 25, 2021, to recognise housing finance companies (HFCs) with assets over Rs 100 crore as ‘Financial Institutions’ under SARFAESI Act, 2002, FHFL has experienced better response from borrower against collection efforts. Gross non-performing assets (GNPAs) were 3.1% as on March 31, 2022, (3.5% as on December 31, 2021) from Rs 3.3% as on March 31, 2021, on a reducing book. While the company had around Rs 15 crore of restructured loans (15.5% of the book), delinquencies have been around 0.23% as March 31, 2022.
Further, performance of the portfolio, given the current macro-environment and its impact on the company’s profitability, will remain a monitorable.
Small scale of operations and geographical concentration in revenue Scale of operations remains modest, with AUM reduced to Rs 97 crore as on December 31, 2021, from Rs 114.0 crore as on March 31, 2021. About 94% of the total portfolio is based in Maharashtra, Gujarat, and Tamil Nadu leading to high geographical concentration. Further, the top four branches (Ahmedabad, Pune, Surat, and Theni) comprised 40.5% of the portfolio. Geographical diversification is expected to improve over the medium term with increasing presence in other states.
In the past, company relied solely on borrowings from ITI group companies or promoter-related concerns. While the company recently received sanction from a bank, the ability to raise funds from other avenues as operations scale-up is critical and will be monitored. |
Liquidity : Adequate Liquidity is adequate with cash and bank balance of Rs 2.7 crore as on July 31, 2021. The company does not have any external debt as on date. |
Outlook Negative Sustainable improvement in asset quality and earning performance is yet to be demonstrated by the ITI group under its revised strategy. |
Rating Sensitivity factors Upward factors: * Improvement in the credit profile of the parent by 3 or more than notches * Scaling up of the loan portfolio while maintaining asset quality
Downward factors: * Deterioration in the credit profile of the parent by 1 or more notches * Change in articulation of support from the parent |
About the Company FHFL is a affordable housing finance company promoted by Mr Sudhir Valia. He, along with his family, is a major shareholder in the ITI group. FHFL received HFC licence in June 2015 and commenced operations in December 2015. Housing loans accounted for 88% of the loan book and loan against property accounted for 12% as on December 31, 2021.
The average ticket size has been Rs 9-10 lakh, with only a few loans above Rs 50 lakh. FHFL operated through 15 branches across four states as on December 31, 2021. The company charges yield of 13.0-16.0%. |
Key Financial Indicators
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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)
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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 09-May-2022 in line with the lender-wise facility details as on 26-Apr-2022 received from the rated entity.
Criteria Details
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