| Kisetsu Saison Finance India Private Limited | ||||||
| Long-term rating upgraded to 'CRISIL AAA/Stable'; short-term rating reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| 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 upgraded its rating on the long-term bank facilities of Kisetsu Saison Finance India Private Limited (Credit Saison India) to ‘CRISIL AAA/Stable’ from ‘CRISIL AA+/Stable’ and has reaffirmed the rating on short-term bank facilities and commercial paper at ‘CRISIL A1+’.
The rating action reflects the improvement in the credit profile of the parent, Credit Saison Co Ltd, Japan (Credit Saison Group), continued high strategic importance of Credit Saison India to the parent and strong moral obligation of the latter to support the Indian subsidiary. The ratings also factor in the improvement in the standalone profile of Credit Saison India, supported by strong capitalization metrics.
Credit Saison group has been in the consumer finance business for 72 years, primarily offering credit card and retail finance products. It has been in the credit card business since inception, with finance and other businesses being added to the portfolio 2001 onwards. Given the track record of operations, Credit Saison is amongst the top 3 credit card companies in Japan and also offers credit cards in alliance with leading businesses across different industries. The group currently has around 35 million cardholders under its portfolio.. Since 2001, the group has been continuously investing towards product diversification and currently has various products under its portfolio spanning across 5 verticals – payments, finance, leasing, real-estate and entertainment. In order to ensure strong growth, Credit Saison has been expanding its operations globally and over the past 7 years has established presence in 6 countries through its subsidiaries and affiliates. With the consistent efforts towards growth through both segmental and geographical diversification, the group has been able to reach the asset size (total receivables outstanding) of Rs 185,519 crore as on December 31, 2022 at a consolidated level.
Credit Saison group’s performance has remained sustainable with improvement in its capital and earnings profile, wherein, the group has been consistently generating strong capital adequacy levels in last 10 years, with the same remaining above 15% across years (barring March 2020, where the capital adequacy dropped to 14.4%). Furthermore, the capital adequacy of the group has improved in last 5 years and reached 15.6% in December 2022, as against 14.4% in March 2020. Additionally, the capitalization metrics of the group remained comfortable with the networth of Rs 37,226 crore[1] as of December 2022, with the same being supported by sufficient internal accruals for the past several years. This is despite significant event-linked challenges including the Great East Japan earthquake, Money Lending Business Act and development of a new technology system, amongst others. For the nine months ended December 31, 2022, the group reported profit after tax (PAT) of Rs 2,789 crore1 as against Rs 2,182 crore1 for the period ending March 31, 2022. The group also saw an improvement in return on assets with the same improving to 1.6% as on December 31, 2022, as against 1.0% in March 2022. The improvement in the earnings profile was supported by the reduction in the operating expenses, wherein, the group had made significant investments to build a new technology system to streamline its payments business. On the asset quality front also, the group continued to maintain comfortable asset quality metrics in terms of 90+dpd remaining in the range of 1.1%-1.7% in last 10 years. The 90+ dpd even improved marginally post the Covid, with same dropping to 1.13%, in December 2022, as against 1.14% in March 2022.
Credit Saison Group plans to invest heavily towards the geographical expansion, specifically in the emerging markets and aims to become the leading neo-finance company in Asia. In line with the overall group strategy on geographical expansion, India is one of the most important markets for the group where the group plans to scale up its business rapidly with a focus on Consumer and MSME segments. As a part of the growth strategy, despite the Indian operations starting from 2019, the group has already infused equity capital of Rs 1,627 crore of which Rs 539 crores was infused in fiscal 2023. The support from the parent is also visible in arranging the debt funding to the Indian operations through common Japanese bank relationships.
Further, the group maintains strong oversight on the Indian operations with deployment of senior management personnel from the Credit Saison Group on to the Board of Credit Saison India. Credit Saison India’s board is controlled by the parent with Mr Katsumi Mizuno and Mr Kosuke Mori as common directors and Mr Yasuyuki Isobe as a director. The risk management policies, systems and processes used by Credit Saison India are centrally approved by the parent. The shared brand and the complete management control also enhances the expectation of support from Credit Saison Group, if needed. Any material disruption in the Indian operations could, in CRISIL Ratings view, have a significant impact on the reputation and franchise of the parent. Credit Saison India is expected to continue to benefit from the strong support from the Credit Saison Group. Any change in the management control by, or expectation of support from, Credit Saison Group will remain a key rating sensitivity factor.
The rating also factors in the strong capital profile of the Indian subsidiary, which has been supported by the regular equity infusions by the parent to support the growth. The parent has infused ~Rs 1,627 crore since inception, of which ~Rs 539 crore was infused recently in fiscal 2023.The networth and gearing of Credit Saison India, remained comfortable at Rs 1,627 crore and 2.3 times respectively as on December 31, 2022, as against Rs 1,128 crore and 1.1 times respectively as of March 2022. [1] Converted at 1 JPY = 0.61 INR |
Analytical Approach For arriving at the ratings, CRISIL Ratings has factored in the support expected from Credit Saison Japan given the strategic importance of Credit Saison India to the former, and the strong moral obligation to support the entity given the ownership, shared brand and strong operational integration. |
Key Rating Drivers & Detailed Description Strengths:
Credit Saison group has been in the consumer finance business for 72 years, primarily offering credit card and retail finance products. It has been in the credit card business since inception, with finance and other businesses being added to the portfolio 2001 onwards. Given the track record of operations, Credit Saison is amongst the top 3 credit card companies in Japan and also offers credit cards in alliance with leading businesses across different industries. The group currently has around 35 million cardholders under its portfolio. Since 2001, the group has been continuously investing towards product diversification and currently has various products under its portfolio spanning across 5 verticals – payments, finance, leasing, real-estate and entertainment. In order to ensure strong growth, Credit Saison has been expanding its operations globally and over the past 7 years has established presence in 6 countries through its subsidiaries and affiliates. With the consistent efforts towards growth through both segmental and geographical diversification, the group has been able to reach the asset size (total receivables outstanding) of Rs 185,519 crore[1] as on December 31, 2022 at a consolidated level.
Credit Saison group’s credit profile saw a sustainable improvement in its capital and earnings profile, wherein, the group has been consistently generating strong capital adequacy levels in last 10 years, with the same remaining above 15% across years (barring March 2020, where the capital adequacy dropped to 14.4% due to Covid). Furthermore, the capital adequacy of the group has improved in last 5 years and reached 15.9% in December 2022, as against 14.4% in March 2020. Additionally, the capitalization metrics of the group remained comfortable with networth of Rs 37,226 crore2 as on December 31, 2022, with the same being supported by sufficient internal accruals for the past several years. This is despite significant event-linked challenges including the Great East Japan earthquake, Money Lending Business Act and development of a new technology system, amongst others. For the nine months ended December 31, 2022, the group reported profit after tax (PAT) of Rs 2789 crore2 as against Rs 2182 crore2 for the period ending March 31, 2022. The group also saw an improvement in return on assets with the same improving to 1.6% as on December 31, 2022, as against 1.0% in March 2022. The improvement in the earnings profile was supported by the reduction in the operating expenses, wherein, the group had made significant investments to build a new technology system to streamline its payments business.
On the asset quality front also, the group continued to maintain comfortable asset quality metrics in terms of 90+dpd remaining in the range of 1.1%-1.7% in last 10 years. The 90+ dpd even improved marginally post the Covid, with same dropping to 1.13%, in December 2022, as against 1.5% in March 2020.
Credit Saison Group plans to invest heavily towards the geographical expansion, specifically in the emerging markets and aims to become the leading neo-finance company in Asia. In line with the overall group strategy on geographical expansion, India is one of the most important markets for the group where the group plans to scale up its business rapidly with a focus on Consumer and MSME segments. As a part of the growth strategy, despite the Indian operations starting from 2019, the group has already infused equity capital of Rs 1627 crore of which Rs 539 crores was infused in fiscal 2023. The support from the parent is also visible in arranging the debt funding to the Indian operations through common Japanese bank relationships.
Further, the group maintains strong oversight on the Indian operations with deployment of senior management personnel from the Credit Saison Group on to the Board of Credit Saison India. Credit Saison India board is controlled by the parent with Mr Katsumi Mizuno and Mr Kosuke Mori as common board directors and Mr Yasuyuki Isobe as a director . The risk management policies, systems and processes used by Credit Saison India are centrally approved by the parent. The shared brand and the complete management control also enhances the expectation of support from Credit Saison Group, if needed. Any material disruption in the Indian operations could, in CRISIL Ratings view, have a significant impact on the reputation and franchise of the parent. Credit Saison India is expected to continue to benefit from the strong support from the Credit Saison Group. Any change in the management control by, or expectation of support from, Credit Saison Group will remain a key rating sensitivity factor.
Capitalization metrics are strongly supported by regular equity infusion by the parent. As a result of regular infusions by the parent entity, the reported networth of the company stood at Rs 1627 crore as on December 31, 2022, as against Rs 1128 crore as on March 31, 2022. The gearing metrics also remained low at 2.3 times as on the same date. Nevertheless, given the growth plans, the company will continue to raise funds while scaling up of operations. The company plans to maintain a steady state net gearing of 5 times in the medium term.
Weaknesses:
Credit Saison India started its operations in 2019 under two verticals – wholesale lending and Co-lending / Fin -Tech Partnerships. In wholesale lending, the company lends to other NBFCs, especially focussing on consumer and MSME segments, whereas, in Co-lending / Fin -Tech Partnerships, the company partners with other NBFCs to co-lend to customer or MSMEs at an agreed ratio. From March 2022, the company also started direct lending to MSMEs through a branch-led business model. Given that the company started its operations only 4 years ago, it is still at the nascent stages. The company had an asset under management (AUM) of Rs 4,786 crore as on December 31, 2022, of which, 63% constituted the Co-lending / Fin -Tech Partnerships portfolio, followed by 26% of wholesale portfolio and 11% of direct lending portfolio.
With the growing portfolio, Credit Saison India has also ensured a strong risk management systems and policies, which involves continuous monitoring of its borrowers as well as Co-lending / Fin Tech partners right from the stage of screening and selection. The company has a well-defined process, right from shortlisting of the borrower/partner to monitoring the portfolio performance. While in the wholesale vertical, the company hypothecates the receivables, whereas in the Co-lending / Fin -Tech Partnerships portfolio, the company gets credit enhancement cover provided by the partner entities.
As a result, the asset quality metrics in terms of 90+ dpd remained comfortable at 0.78% as on December 31, 2022, as against 0.37% in fiscal 2022. Post accounting the credit enhancement, the 90+ dpd will be at 0.01% as on December 31, 2022 and 0.03% as on March 31, 2022.
Nevertheless, the portfolio currently lacks seasoning and how the company uses its risk mitigants to maintain the asset quality remains to be seen. Additionally, the company has started the direct lending book, which will now expand further in the near and medium term. Therefore, sustenance on the asset quality metrics while scaling up this portfolio also remains a key monitorable.
Credit Saison India turned profitable within 1 year of initiating its lending operations, with it reporting a profit after tax (PAT) of Rs 12.1 crore in fiscal 2021. This has been achieved due to low credit costs supported by the Credit Enhancements and nil cost of borrowings at the time as the company remained debt-free during the given period.
The company continued to generate healthy profits in the latter years also and reported a profit after tax of Rs 61 crore in the nine months ending December 31, 2022, as against Rs 30 crore in fiscal 2022.
However, the earnings remained constrained due to moderate operating expenses, given the nascent stage of operations. Operating expenses (as a percentage of advances) stood at 6.0% (annualized) as on December 31, 2022. Since the company is still at nascent stage of its operations, the operating expenses are expected to remain moderate, as the company invests more on the expansion of branches for the direct lending business, technology, employees and risk management. Improvement of the earnings profile as the company scales up its operations therefore remains a key sensitivity factor. [1] Converted at 1 JPY = 0.61 INR |
Liquidity: Superior Credit Saison India’s liquidity profile remained comfortable as on December 31, 2023, as the company had cash and cash equivalents of Rs 611 crore, unutilized term loans of Rs 980 crore and unutilized WCDL lines of Rs 20 crore. Against this, the company had debt repayments (including interest) of Rs 452 crore for the next three months (January 2023 – March 2023). Asset-liability maturity profile of the company also remained comfortable as on December 31, 2022 with positive mismatches across the buckets up to 1 year. The company has a policy of maintaining liquidity cover of 3-6 months of debt repayments. |
Outlook: Stable CRISIL Ratings believes Credit Saison India will remain strategically important to, and will continue to receive financial, managerial, and operational support from, Credit Saison Co. Ltd. |
Rating Sensitivity factors Downward factors ● Decline in support from the parent, Credit Saison Group or material change in the shareholding, or any downward revision in CRISIL Ratings view, on the credit profile of Credit Saison Group ● Any adverse movement in asset quality with 90+ dpd including write-offs increasing beyond 4% (net of any credit enhancements) leading to a sustained impact on the earnings profile ● Company reporting losses on consistent basis |
About the the Company Credit Saison India Credit Saison India, a wholly owned subsidiary of Credit Saison Japan, was incorporated in June, 2018. The company received its NBFC licence in September 2019 and started its operations with adoption of partnership-led model as its entry strategy, wherein, the company partners with other NBFCs / FinTechs to help build its retail book. Through the partnership model, the company ties up with top tier NBFCs and Fintech in the two verticals – Wholesale Lending and Co-lending / Fin -Tech Partnerships. In Feb 2022, the company also started direct lending to MSMEs. While the given portfolio remained relatively small, however, it is expected to increase in the medium term.
About Credit Saison Co. Ltd. Credit Saison Japan was founded in the year 1951. The group offers consumer finance/SME finance products. Till 2001, the group was primarily into the credit card business, post-which, it began to diversify its revenue streams and currently has a presence across multiple segments such as payments business (credit card service), finance/lending business, leasing and real estate. In 2013, the group began to further expand its operations globally and currently has presence in 6 countries through its subsidiaries. At the consolidated level, the group had a receivables outstanding of Rs 185,519 crore3 as on December 31, 2022. The net worth of the group stood at Rs 37,226 crore3 as on the same date. For the nine months ended December 31, 2022, the group reported profit after tax (PAT) of Rs 2789 crore[1] as against Rs 2182 crore3 for the period ending March 31, 2022. [1] Converted at 1 JPY = 0.61 INR |
Key Financial Indicators
*All figures for the period ending/as on December 31, 2022 are provisional Note: Almost all of the reported 90+ dpd is covered by Credit Enhancement. Post accounting the credit enhancement cover the 90+ dpd would be 0.01% as on December 31, 2022 and 0.03% as on March 31, 2022. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 22-Mar-23 in line with the lender-wise facility details as on 20-Oct-21 received from the rated entity.
Criteria Details
|