Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BB/Stable’ rating to the long-term bank facility of Nalin Lease Finance Ltd (Nalin Lease).
The rating takes into consideration the extensive experience of the promoters in the financing business, and the company’s adequate capital position and comfortable earnings profile. These strengths are partially offset by small scale of operations with regional concentration and limited diversity in resource profile.
Nalin Lease has been operational for more than 30 years, offering loan against gold jewellery, two-wheeler finance and education loans. The company’s assets under management (AUM) grew around 7% year till date to Rs 24.17 crore as on September 30, 2023, against Rs 22.49 crore as on March 31, 2023. The portfolio consists of 60% gold loans, 39% two-wheeler vehicle loans and 1% education loans.
The capital position of the company has remained adequate with networth of Rs 29.5 crore and gearing of 0.15 time as on September 30, 2023 (Rs 27.7 crore and 0.06 time, respectively, as on March 31, 2023). The promoters have been consistent in infusing capital at regular intervals. Apart from this, the company has also been profitable on a consistent basis and, hence, steady accretions have also been supporting the capital position. During the three years through September 2023, the company reported return on managed assets (ROMA) of 10.4-10.7%.
As far as asset quality is concerned, the company has been able to maintain portfolio quality primarily because of an adequate risk management system and long track record of operations in existing geographies. The GNPA stood at 1.58% as on September 30, 2023, compared to 4.92% as on March 31, 2022. Since majority of the company’s portfolio is in the gold loan segment, the reduction in gross non-performing assets (GNPAs) is primarily on account of auctions. Nevertheless, CRISIL Ratings believes that as the company ventures into a new segment such as education loans, its ability to maintain asset quality and scale up the loan book will remain key monitorables.
The company has been growing primarily on its own funds, that is capital that has been infused by the promoters on a timely basis. However, it has not been able to leverage its capital position and raise sufficient funds through routes such as bank loans or loans from non-banking financial companies (NBFCs) and financial institutions (FIs). Therefore, the ability of the company to raise sufficient funding to support its future growth in operations will remain a key sensitivity factor. |
Analytical Approach CRISIL Ratings has assessed the business and financial risk profile of Nalin Lease on a standalone basis. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
As far as asset quality is concerned, the 90+ dpd was 1.58% as on September 30, 2023, compared to 4.92% as on March 31, 2022. Since the majority of the company’s portfolio is in the gold loan segment, the reduction in GNPAs is primarily on account of auctions. Nevertheless, CRISIL Ratings believes that as the company ventures into a new segment such as education loans, its ability to maintain asset quality and scale up the loan book will remain key monitorables.
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Liquidity: Adequate As on September 30, 2023, the company had liquidity of Rs 10.04 crore (including cash and equivalent, liquid investments and unutilised cash credit and working capital loan). Liquidity is further supported by commitment of support by the promoters during exigencies. |
Outlook: Stable CRISIL Ratings believes that Nalin Lease will benefit from the extensive experience of its promoters in the financing business. The company will also benefit from adequate capitalisation and maintain a comfortable earnings profile. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Nalin Lease, based out of Himmatnagar, Gujarat, was registered in 1990. The company, which is categorised as a non-government public limited company, was listed on the Bombay Stock Exchange (BSE) in 1995. The branch at Gujarat, offers vehicle, gold and education loans to around 4,800 customers in Sabarkantha, Arvalli, Mehsana and other districts in the vicinity. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||
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Criteria Details
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