Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil BBB-’ rating on the long-term bank facilities of Niyogin Fintech Ltd (NFL). Outlook on the long-term bank facilities of NFL has been revised from ‘Stable’ to ‘Negative’.

 

The outlook revision reflects NFL’s net losses over the past five fiscals. In the first half of fiscal 2025 as well, the company incurred a net loss of Rs 14.1 crore on a consolidated basis. As operations are at an early stage, the earnings profile is constrained by elevated operating expenses, primarily attributed to substantial investments in establishing technology infrastructure and recruiting top-tier professionals. The ability to achieve breakeven and sustain profitability by limiting incremental cost will be monitorable.

 

The outlook revision also factors in the company’s modest asset quality with 90+ days past due (dpd) of 16.7% as on September 30, 2024 as against 20.4% as of March 31, 2024. However, these delinquencies included a sizeable portfolio from the past, against which the company has a first-loss default guarantee (FLDG) cover. Hence, the actual portfolio at risk is lower, but elevated, with adjusted 90+ dpd of ~7.2% as on September 30, 2024, and ~8.3% as on March 31, 2024.

 

The rating continues to reflect the company’s healthy capitalisation with networth of Rs 275.2 crore and gearing of 0.2 time as on September 30, 2024. Crisil Ratings notes that NFL is likely to receive Rs 57 crore (out of warrants worth Rs 80 crore issued last fiscal) in the near term. Moreover, the rating considers the extensive experience of the founders, Mr Amit Rajpal and Mr Gaurav Patankar, and of key managerial personnel who have held senior roles at renowned firms in the banking, financial services and insurance (BFSI) sector. These strengths are partially offset by the company’s small, albeit increasing, scale of operations and modest asset quality and earnings profile.

 

NFL is an early-stage company and started operations in 2018. NFL comprises IServeU Technology Pvt Ltd (ISU; 51% subsidiary of NFL), MoneyMap Investment Advisors Pvt Ltd (MoneyFront; a wholly owned subsidiary of Investdirect Capital Services Pvt Ltd [60% subsidiary of NFL]) and Niyogin AI Pvt Ltd (wholly owned subsidiary).

 

NFL acquired ISU in fiscal 2021. ISU is a tech platform which provides financial inclusion products and services such as Micro-ATM, Aadhaar-enabled Pay System (AePS), Domestic Money Transfer (DMT) and Bharat Bill Pay System (BBPS).

 

NFL also has a lending business wherein it provides small-ticket unsecured business loans to micro, small and mid-sized entrepreneurs (MSMEs) and focuses on market access through financial professionals.

 

In April 2024, NFL incorporated its wholly owned subsidiary, Niyogin AI Pvt Ltd, for the acquisition of an AI-based platform, SuperScan.

Analytical Approach

To arrive at the rating, Crisil Ratings has combined the business and financial risk profiles of NFL and its subsidiaries, ISU, Investdirect Capital Services Pvt Ltd and Niyogin AI Pvt Ltd.

 

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:

• Healthy capital position: The consolidated networth was healthy at Rs 275.2 crore as on September 30, 2024 (Rs 287.8 crore as on March 31, 2024). The capital structure is further backed by Rs 235 crore raised by the promoters from institutional investors within the first year of operations and warrants of Rs 80 crore in fiscal 2024. Gearing was comfortable at 0.2 time as on September 30 and March 31, 2024. The lending business under NFL is also comfortably capitalised, as indicated by networth of Rs 302.1 crore and gearing of 0.2 time as on September 30, 2024. NFL will be receiving equity of Rs 57 crore in the near term out of the warrants of Rs 80 crore issued last fiscal.

 

• Extensive experience of the board and management in the BFSI sector: Mr Amit Rajpal and Mr Gaurav Patankar, the co-founders, bring extensive experience from senior roles at distinguished firms in the BFSI sector. Aligned with their vision of utilising a technology-driven, partner-centric approach to empower MSMEs and advance financial inclusion in rural areas, they have strategically assembled a management team of experts with a track record of success in leading financial institutions. The founders have demonstrated their prowess in mobilising substantial resources, securing Rs 235 crore from institutional investors within the first year at NFL. Operations are managed by Mr Tashwinder Singh, the MD and CEO, who has experience of nearly three decades in strategic and operational roles, having held leadership positions in Citigroup, KKR and O3 Capital in the past. 

 

Weaknesses:

• Small, albeit increasing, scale of operations: While ISU was incorporated in fiscal 2016 and started operations in fiscal 2018, NFL acquired ISU only in fiscal 2021 and the company’s operations started to ramp up only in fiscal 2022 post the investment of Rs 50 crore by NFL. Hence, ISU is still in nascent stage of operations. ISU’s business expansion relies heavily on growth and outreach of every partner integrated into the platform, because of the partnership-centric model. Gross transaction value (GTV) rose from Rs 6,912 crore in fiscal 2021 to Rs 43,760 crore in fiscal 2024 and was Rs 21,020 in the first half of fiscal 2025. Ability to retain partners and bring in more partners will remain monitorable.

 

As the bulk of revenue in ISU comes from fee per transaction and subscription revenue from sale of SaaS solutions, scale is critical to ensure breakeven and profitability. While the platform is scalable and products can be added to drive revenue growth, the company has not faced any major competition so far. Ability to price commissions appropriately as competition intensifies, along with increasing scale of operations, will be monitorable. 

 

The lending business has a relatively short track record, as operations commenced in fiscal 2018. The assets under management for the lending division rose at a compound annual growth rate of ~44% over fiscals 2021-2024 to reach Rs 166 crore as on March 31, 2024, and grew further to Rs 215 crore as on September 30, 2024. Given that the average tenure for unsecured business loans is of 12-24 months, the loan portfolio has seen limited seasoning.

 

• Modest asset quality and earnings profile: The 90+ dpd stood high at 16.7% as on September 30, 2024 as compared to 20.4% as on March 31, 2024. However, these delinquencies included a sizeable portfolio from the past, against which the company has a FLDG cover. Hence, the actual portfolio at risk is lower, though still elevated, with adjusted 90+ dpd of nearly 7.2%. Collection efficiency remains modest, averaging 96% for the 12 months ended September 30, 2024.

 

For the first half of fiscal 2025, the lending business reported loss of Rs 4.6 crore, following a loss of Rs 7.6 crore in the previous fiscal. On a consolidated basis as well, NFL reported net loss over the past five fiscals. In the first half of fiscal 2025 as well, the company incurred a net loss of Rs 14.1 crore. As operations are at an early stage, the earnings profile is constrained by elevated operating expenses, primarily attributed to substantial investments in establishing technology infrastructure and recruiting top-tier professionals. Profitability should improve over the medium term, as the company achieves economies of scale. However, the ability to achieve breakeven and sustain profitability by limiting incremental cost will be monitorable.

Liquidity: Adequate

Asset-liability maturity profile was comfortable as on December 31, 2024, with positive mismatches across buckets up to one year. As on December 31, 2024, NFL had cash and liquid investments of Rs 30.2 crore, against debt obligation of Rs 30.3 crore (between January and March 2025). This corresponds to a liquidity cover of nearly 1 time as on December 31, 2024, for three months.

Outlook: Negative

The negative outlook reflects constrained earnings profile of NFL.

Rating sensitivity factors

Upward factors:

• Improvement in operating margin to 12-15% along with steady increase in scale of operations
• Sustenance of healthy capitalisation and gearing
• Significant improvement in asset quality metrics and overall profitability

 

Downward factors:

• Continued operating losses over an extended period
• Weakening of capital profile
• Continued pressure on asset quality metrics resulting in 90+ dpd (without adjusting for FLDG) of over 5% on a steady-state basis

About the Company

NFL emerged as an early-stage fintech entity, following the acquisition of M3 Global Finance Ltd, a BSE-listed non-banking financing company established in 1988, by Information Interface India Pvt Ltd. It was subsequently rebranded as NFL in May 2017.

 

In 2019, NFL acquired Moneyfront, a platform providing wealth advisory and analytics services catering to individuals, MSMEs and large enterprises. Additionally, in 2020, the company acquired ISU, a 'Banking as a Service' platform for Niyogin, offering essential banking services to rural individuals. Beginning operations in 2016 in Karnataka, ISU expanded its footprint to cover all states within four years, with a notable emphasis on Karnataka, Maharashtra, Andhra Pradesh, Gujarat, Rajasthan, Uttar Pradesh, Bihar, Jharkhand, West Bengal and Assam.

 

Through its credit aggregation platform, NFL offers seamless, entirely digital access to credit for MSMEs via an extensive network of financial professionals, facilitated by product partners such as NBFCs and banks. Presently, the company has integrated 6,217 lending associates who generate inquiries across the country.

 

In April 2024, the company incorporated a wholly owned subsidiary, Niyogin AI Pvt Ltd for the purpose of acquisition of AI based platform, SuperScan.

Any other information: Not Applicable