Rating Rationale
December 07, 2023 | Mumbai
Hiranandani Financial Services Private Limited
Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.1000 Crore (Enhanced from Rs.650 Crore)
Long Term RatingCRISIL A/Stable (Reaffirmed)
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 reaffirmed its ‘CRISIL A/Stable’ rating on the bank loan facilities of Hiranandani Financial Services Private Limited (HFS)

 

The rating reflects expectation of strong support from the House of Hiranandani (HoH) group on an ongoing basis and in case of distress. This exhibits the strategic importance of HFS, the primary vehicle for the financial services business of the group, and the commitment of the group to support the company given 100% shareholding by the promoters and the common brand. The rating also factors in a comfortable capital position and experienced management of HFS. These strengths are partially offset by the nascency in operations of the company.

 

HFS is a non-banking finance company (NBFC) engaged in financing of micro, small and medium enterprises (MSME). The company is a part of the HoH group, which is one of the established real estate developers in India. Mr Surendra Hiranandani and his family members (the SLH family) are the promoters of the group, and HFS is the first channel of diversification for the group outside the real estate segment. HFS started its lending operations with institutional financing while setting up the retail branch network and processes. Since then, it has steadily expanded its presence in MSME financing over the past three years, and MSME loans now form 100% of its portfolio.

 

The share of MSME loans in the overall portfolio increased to 100% of assets under management (AUM) as on September 30, 2023, from 56% as on March 31, 2021, driven by growth in the MSME book and de-focus of the institutional loan portfolio. Overall loan book stood at Rs 1360 crore as on September 30, 2023 vis-à-vis Rs 1016 crore as on March 31, 2023 and Rs 420 crore as on March 31, 2022.

Analytical Approach

CRISIL Ratings has analysed the standalone business and financial risk profiles of HFS. The rating factors in expectation of strong support from the HoH group given the company’s high strategic importance to, and strong operational and financial linkages with, the group.

Key Rating Drivers & Detailed Description

Strengths:

  • Expectation of strong support from the HoH group: HFS is a part of the HoH group, promoted by the SLH family. The financial services entity has been identified as the primary focus for the group’s diversification plans. HFS benefits from the group in terms of the shared brand name of the group, and financial as well as operational synergies with the group. The promoters of the company have infused equity capital of Rs 500 crore since inception. Apart from the equity, the promoters also support HFS through interest-free unsecured loans.

 

The promoters are actively involved in the key strategy and decision-making plans of the company. They have representation across most of the key committees of HFS, such as asset liability, risk management and investment. HFS is expected to leverage and benefit from the shared brand in raising resources and in building relationships with bankers. Given the strategic importance of HFS to the group’s diversification plans, the promoters will continue to provide support (on an ongoing basis and in case of distress) to HFS and hold majority shareholding over the medium term.

 

  • Experienced management team: HFS has an experienced management team to run the business. The company is led by Mr Uday Suvarna, the chief executive officer. He has more than two and half decades of experience in the retail and MSME lending domain. The leadership team across other key functions is well qualified and has extensive experience in retail lending businesses, including the MSME lending space across geographies of India. The company has an experienced board of directors, with independent directors holding more than three decades of experience in the financial sector.

 

  • Comfortable capitalisation metrics, supported by capital infusion from the promoters.: The capital position is comfortable, evidenced by a reported networth of Rs. 532 crore as on September 30, 2023, with gearing of 1.85 times compared to Rs 514 crore and gearing of 1.4 times as on March 31, 2023. Tier 1 capital adequacy and overall capital adequacy ratio stood at 38.11% and 38.55% respectively for September 30, 2023, in comparison to 49.20% and 49.64% as on March 31, 2023. On a steady state basis, as the portfolio scales, gearing is expected to rise from current levels, however, should remain under 4 times. The promoters have infused equity capital of Rs 500 crore since inception and are likely to continue to do so to boost business growth.

 

Weakness:

  • Operations, though growing, remain in a nascent stage: HFS commenced operations in fiscal 2019. Since then, its portfolio has gradually scaled to reach Rs 1360 crore as of September 30, 2023. Nonetheless, the company is still in the early stage of its operations and majority of the loan portfolio remains unseasoned., HFS is primarily engaged in MSME lending, which accounted for 100% of the loan book as on September 30, 2023.  As on September 30, 2023, gross non-performing assets (GNPAs) stood at 0.90%% against 0.58% as on March 31, 2023. The movement in GNPAs in the last two fiscals is primarily on account of slippages in the institutional lending book following the Covid-19 pandemic and, in the acquired direct assignment book. Furthermore, the share of company’s restructured portfolio in the AUM was low at around 0.14% as on September 30, 2023. Given the secured nature of lending, ultimate credit losses should be lower. However, the company’s ability to profitably scale its operations across business cycles will remain a monitorable. As the company is in its growth phase, its earnings profile, though improving, remains constrained by high operating expenses. For fiscal 2023, HFS reported a profit after tax (PAT) of Rs 23.33 crore as compared to a net loss of Rs 6.51 crore reported for the previous fiscal. For the first half of fiscal 2024, PAT stood at 18.1 crore.

 

Over the medium to long term, the ability of the company scale up operations while maintaining healthy asset quality and profitability will be a key monitorable.

Liquidity: Adequate

As per the asset and liability management statement as on September 30, 2023, HFS had positive cumulative mismatches across all buckets. Cash and equivalents stood at Rs 241.65 crore as on September 30, 2023 against Rs 119 crore of repayment obligations scheduled for maturity over the succeeding 5 months. The company has a practise of maintaining liquidity worth of two months of fixed obligation on an average basis.

Outlook: Stable

HFS will continue to benefit from strong support of the promoter group and will have comfortable capitalisation over the medium term.

Rating Sensitivity factors

Upward factors:

  • Upgrade in the credit risk profile of the HoH group
  • Improvement in the earnings profile, with return on assets greater than 2% on a sustained basis
  • Increase in scale of operations while maintaining asset quality

 

Downward factors:

  • Reduction in expected support to the financial services businesses by, or downgrade in the credit risk profile of, the HoH group
  • Weakening of the capitalisation metrics, with adjusted gearing increasing above 4 times on a steady-state basis
  • Moderation in profitability resulting in losses for a prolonged period.

About the Company

HFS (erstwhile Dobra Finance Pvt Ltd) was incorporated on February 10, 2017, and is a non-systemically important non-deposit-taking NBFC registered with the RBI. The company was renamed, and a fresh certificate of incorporation with the new name was received on February 07, 2019. The company is a part of the HoH group, promoted by the SLH family. The family held a 99.3% stake in the company as on September 30, 2023.

 

The company finances MSME. HFS was operating with 92 branches across nine states as on September 30, 2023. It had total AUM of Rs 1360 crore as on September 30, 2023.

Key Financial Indicators

As on 30/31,

Unit

H1 2024

FY 2023

FY 2022

FY 2021

Total assets

Rs crore

1634

1229

481

219

Total income

Rs crore

117.50

131.10

51

26

Profit after tax

Rs crore

18.10

23.33

-7

2

GNPA

%

0.90

0.6

1.0

1.6

Adjusted gearing

Times

1.85

1.4

0.2

1.2

Return on assets

%

2.5

2.7

-1.7

0.8

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 Long Term Loan NA NA 18-May-27 55.28 NA CRISIL A/Stable
NA Long Term Loan NA NA 28-Jun-28 50 NA CRISIL A/Stable
NA Long Term Loan NA NA 31-Mar-27 21.88 NA CRISIL A/Stable
NA Long Term Loan NA NA 28-Jun-27 41.67 NA CRISIL A/Stable
NA Long Term Loan NA NA 30-Jul-26 36.25 NA CRISIL A/Stable
NA Long Term Loan NA NA 29-Nov-26 80 NA CRISIL A/Stable
NA Long Term Loan NA NA 28-Sep-27 63 NA CRISIL A/Stable
NA Long Term Loan NA NA 19-Oct-27 45.31 NA CRISIL A/Stable
NA Long Term Loan NA NA 14-Nov-26 19.68 NA CRISIL A/Stable
NA Long Term Loan NA NA 28-Jun-28 50 NA CRISIL A/Stable
NA Long Term Loan NA NA 27-Sep-28 25 NA CRISIL A/Stable
NA Long Term Loan NA NA 15-Nov-28 39.17 NA CRISIL A/Stable
NA Long Term Loan NA NA 23-Jun-28 70 NA CRISIL A/Stable
NA Long Term Loan NA NA 31-Jul-27 69.33 NA CRISIL A/Stable
NA Cash Credit NA NA NA 17 NA CRISIL A/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 316.43 NA CRISIL A/Stable
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1000.0 CRISIL A/Stable 28-08-23 CRISIL A/Stable 26-12-22 CRISIL A/Stable   --   -- --
      -- 14-06-23 CRISIL A/Stable 04-11-22 CRISIL A/Stable   --   -- --
      -- 23-03-23 CRISIL A/Stable 17-10-22 CRISIL A/Stable   --   -- --
      --   -- 17-06-22 CRISIL A/Stable   --   -- --
      --   -- 12-05-22 CRISIL A/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 1 The Federal Bank Limited CRISIL A/Stable
Cash Credit 5 Kotak Mahindra Bank Limited CRISIL A/Stable
Cash Credit 10 YES Bank Limited CRISIL A/Stable
Cash Credit 1 IDFC FIRST Bank Limited CRISIL A/Stable
Long Term Loan 50 Bank of Baroda CRISIL A/Stable
Long Term Loan 50 Poonawalla Fincorp Limited CRISIL A/Stable
Long Term Loan 45.31 Kotak Mahindra Bank Limited CRISIL A/Stable
Long Term Loan 21.88 The Federal Bank Limited CRISIL A/Stable
Long Term Loan 63 IndusInd Bank Limited CRISIL A/Stable
Long Term Loan 55.28 AU Small Finance Bank Limited CRISIL A/Stable
Long Term Loan 69.33 YES Bank Limited CRISIL A/Stable
Long Term Loan 80 IDFC FIRST Bank Limited CRISIL A/Stable
Long Term Loan 70 Union Bank of India CRISIL A/Stable
Long Term Loan 19.68 Mahindra and Mahindra Financial Services Limited CRISIL A/Stable
Long Term Loan 41.67 HDFC Bank Limited CRISIL A/Stable
Long Term Loan 25 The South Indian Bank Limited CRISIL A/Stable
Long Term Loan 36.25 ICICI Bank Limited CRISIL A/Stable
Long Term Loan 39.17 Tata Capital Financial Services Limited CRISIL A/Stable
Proposed Long Term Bank Loan Facility 16.43 Not Applicable CRISIL A/Stable
Proposed Long Term Bank Loan Facility 300 Not Applicable CRISIL A/Stable
Criteria Details
Links to related criteria
Rating Criteria for Finance Companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Group Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

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

Subha Sri Narayanan
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
subhasri.narayanan@crisil.com

Bharat Nagda
Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Bharat.Nagda@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') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. 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 providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for 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 report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. 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 or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party 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.

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. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

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.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html