Rating Rationale
July 16, 2024 | Mumbai
SBI Global Factors Limited
Ratings reaffirmed at 'CRISIL AAA/Stable/CRISIL A1+'
 
Rating Action
Rs.100 Crore (Reduced from Rs.200 Crore) Subordinated DebtCRISIL AAA/Stable (Reaffirmed)
Rs.750 Crore Commercial PaperCRISIL A1+ (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 AAA/Stable/CRISIL A1+' ratings on the existing debt instruments of SBI Global Factors Limited (SBIGFL).

 

CRISIL Ratings has withdrawn its ratings of Subordinate Debt of Rs 100 crore (See 'Annexure - Details of Rating Withdrawn' for details) as the same was not issued. This is in line with its withdrawal policy.

 

The ratings continue to factor SBIGFL's strategic importance to, and the strong moral obligation on, the parent State Bank of India (SBI; rated 'CRISIL AAA/Stable/CRISIL AA+/Stable'), to support the company. The rating also factors in comfortable capital position. These rating strengths are partially offset by asset quality and profitability, which remain a key monitorable.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has assessed the standalone credit risk profile of SBIGFL and continues to factor in strong managerial and financial support from the parent SBI. CRISIL Ratings believes SBIGFL, will, in case of exigencies, receive distress support from its parent for timely repayment of debt obligations, considering the strategic importance of the entity and high moral obligation on account of majority shareholding and shared brand name.

Key Rating Drivers & Detailed Description

Strengths:

  • Expectation of strong support from SBI: The ratings continue to be centrally based on SBI's strong moral obligation to support SBIGFL, given its complete ownership (100% stake as on March 31, 2024), shared brand, and management control. SBI continues to provide strong management, operational, and financial support to the company. SBIGFL, the leading market player in the factoring business, is likely to operate independently as a key factoring arm of the group and continue to build market for the business in India. The company will also continue to focus on increasing its share of non-factoring business which should improve its business risk profile.

 

SBIGFL has received multiple rounds of capital from SBI in the past and the latter is expected to remain a majority shareholder in the company. SBIGFL also derives support from SBI in the form of bank lines, this limit stood at Rs 1849.14 crore as on May 28, 2024. Besides, SBIGFL's board has representation from SBI, and the parent is actively involved in strategic decision making. The company's senior management team continues to be on deputation from SBI. Any significant decline in SBIGFL's strategic importance to, or majority ownership by, SBI, and in support from the parent will remain a key rating sensitivity factor.

 

  • Comfortable capital position: SBIGFL had a tier-1 and overall capital adequacy ratio (CAR) of 21.52% and 26.72% respectively, as on March 31, 2024 (27.08% and 34.37% respectively, as on March 31, 2023). Networth increased to Rs. 452 crore as of March 31, 2024 from Rs 408 crore, a year ago - due to internal accruals. Gearing has remained low over the past two fiscals and as on March 31, 2024, stood at 3.0 times. Over the medium term, it is expected to remain within 2-3 times.

 

Weakness:

  • Asset quality and profitability, though improving, remain a monitorable: Asset quality has stabilized in the recent past. Gross non-performing assets (GNPA) was 2.36% as on March 31, 2024, as against 2.72% on March 31, 2023. The company did not make any write offs during fiscal 2024 (Rs 52 crore of write offs were done in fiscal 2023). Slippages to NPAs (as % of Funds in Use) increased to 1.53% in fiscal 2024 (0.38% in fiscal 2023) owing to increased additions to NPAs whereas recoveries have remained moderate. Nonetheless, provision coverage ratio (PCR) remained comfortable at 99.4% as on March 31, 2024 vis-à-vis 99.81%, a year ago. From a medium-term perspective, the company’s ability to curtail incremental slippages and increase recoveries, will remain a monitorable.

 

With gradual improvement in asset quality over the past few quarters, profitability has also seen an uptick. For fiscal 2024, SBIGFL reported a PAT of Rs 44 crore as against a PAT of Rs 31 crore in fiscal 2023. Correspondingly, the return on assets (RoA) for the respective periods improved to 2.86% from 2.52%. As the volumes across factoring and non-factoring businesses grow in the normal course of business, the company's ability to sustain steady improvement in profitability, remains a monitorable.

Liquidity: Superior

The asset liability management profile was comfortable as on March 31, 2024, with positive cumulative mismatches in the buckets up to one year period. Liquidity stood at Rs 1206.21 crore (Cash and cash equivalents of Rs 2.76 crore and unutilized bank lines of Rs 1203.45 crore) as on May 31, 2024. This is enough to cover the upcoming Rs 267.69 crore repayments until August 31, 2024. The company has the flexibility to get additional lines from SBI, if required

 

As on March 31, 2024, the total borrowings were Rs 1342 crore, with bank borrowings constituting 85% of this base. Around 66% of the total sanctioned bank lines are from the parent, SBI. The company has the flexibility to get additional lines from SBI, if required.

Outlook: Stable

CRISIL Ratings believes SBIGFL will continue to receive strong managerial and financial support from the parent SBI.

Rating Sensitivity factors

Downward factors:

  • Downward change in the credit risk profile of SBI by 1 notch could have a similar impact on the rating for SBIGF
  • Any material change in the shareholding or group support philosophy of SBI

About the Company

Incorporated in 2001, SBIGFL is a registered non-banking financial company that offers domestic factoring, export and import factoring, and discounting of bills under letter of credit services to the small-and-medium enterprise sector. As on March 31, 2024, factoring business outstanding stood at 79% (84% outstanding as on March 31, 2023) while gold pool business outstanding was 21% as on March 31, 2024 (16% as on March 31, 2023).

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Total assets

Rs crore

1833

1278

Total income

Rs crore

158

174

PAT

Rs crore

44

31.2

Gross NPA

%

2.36

2.72

Gearing

Times

3.0

2.1

Return on assets

%

2.86

2.52

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 Commercial paper NA NA 7-365 days 750 Simple CRISIL A1+
INE912E08AE7 Subordinate Debt 28-Jul-2021 7.28% 28-Jul-2031 100 Complex CRISIL AAA/Stable

 

Annexure - Details of Rating Withdrawn

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Subordinate Debt* NA NA NA 100 Complex Withdrawn

*Yet to be issued

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 750.0 CRISIL A1+   -- 18-07-23 CRISIL A1+ 07-07-22 CRISIL A1+ 09-07-21 CRISIL A1+ CRISIL A1+
      --   -- 28-06-23 CRISIL A1+   -- 04-02-21 CRISIL A1+ --
Non Convertible Debentures LT   --   --   -- 07-07-22 Withdrawn 09-07-21 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   --   -- 04-02-21 CRISIL AAA/Stable --
Subordinated Debt LT 100.0 CRISIL AAA/Stable   -- 18-07-23 CRISIL AAA/Stable 07-07-22 CRISIL AAA/Stable 09-07-21 CRISIL AAA/Stable --
      --   -- 28-06-23 CRISIL AAA/Stable   --   -- --
All amounts are in Rs.Cr.
Criteria Details
Links to related criteria
Rating Criteria for Finance Companies
Rating criteria for hybrid debt instruments of NBFCs/HFCs
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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