| Sewa Grih Rin Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ rating on the bank facilities of Sewa Grih Rin Limited (SGRL).
The ratings continue to reflect the adequate capitalisation and funding profile of the company, and the experienced management team. These strengths are partially offset by the company’s early stage of operations and a relatively unseasoned portfolio.
Lockdowns amid the Covid-19 pandemic led to disruption in economic activity and exerted pressure on the cash flow of borrowers. Consequently, collections dropped during lockdowns, both in the first and second waves of the pandemic but recovered gradually owing to subsequent easing of movement restrictions. The third wave of the pandemic has not disrupted the operations materially however, any change in the payment discipline of the borrowers may affect the delinquency levels and will remain a monitorable.
Under the Reserve Bank of India (RBI) Resolution Framework 1.0 and 2.0 for Covid-19-related stress, the company restructured around 6.2% of assets under management (AUM) as on December 31, 2021. Also, gross non-performing assets (GNPAs) inched up to 0.78% as on December 31, 2021, from 0.30% as on March 31, 2021, mainly on account of the pandemic and impact from the clarification released by the RBI on November 12, 2021. While the company is adequately capitalised, its ability to manage collections and asset quality in fiscal 2023 will be a key monitorable. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of SGRL. |
Key Rating Drivers & Detailed Description Strengths:
The capital position is adequate, supported by networth of Rs 123 crore, in relation to the modest size of the advance book as on December 31, 2021. As on December 31, 2021, gearing was 1.8 times but is expected to increase as the scale improves. Furthermore, the company plans to complete Series D round of funding of around Rs 90 crore by early fiscal 2023. On a steady-state basis, gearing is expected at 4-5 times.
The company has attracted Rs 127 crore in capital since it commenced operations in 2015 from a strong investor base with Sewa Mutual Benefit Trust (SMBT), Women’s World Bank (WWB), Oikocredit Ecumenical Development Cooperative Society U. A. (Oikocredit), Omidyar Network Fund Inc. (Omidyar), HDFC Holdings, AHI Capital, and HDFC Life all holding stakes in the company.
The business model of SGRL combines lending with social impact, catering to a niche market of informal housing tenure or incomplete property documentation - wherein it assists potential customers in making the property title legally executable. SGRL is expected to continue to benefit from the support of its investors.
On the debt side, the US International Development Finance Corporation sanctioned a low cost, 15-yearlong credit line of USD 30 million (Rs 225 crore) in August 2019 at an all-in cost of 9.3%. Of this, the company has drawn down USD 12 million (around Rs 90 crore), with USD 10 million (around Rs 75 crore) available for drawdown. The remaining USD 8 million (around Rs 60 crore) will be available after incremental equity infusion of Rs 33 crore. Additionally, the company received sanctions from large banks, such as State Bank of India and HDFC Bank, at fairly competitive margin. This will support the growth plans of SGRL and help maintain its asset-liability profile, and improved profitability.
The current senior management team has been with the company since its inception and has played a critical role in attracting equity and credit investors through their earlier work connections. Ms Shruti Gonsalves (chief executive officer and managing director) has work experience of around 22 years and has been associated with the government and agencies in development finance and financial inclusion. The company also has an experienced second line, which has helped put adequate systems and processes in place to manage the inherent risks in the borrower profile.
Weakness:
The company commenced operations around six years ago and remains a small player in the affordable housing finance industry, with a loan book of Rs 275 crore as on December 31, 2021. While the current level of delinquencies is low, GNPAs inched up to 0.78% as on December 31, 2021, from 0.30% as on March 31, 2021, because of the Covid-19 pandemic and the RBI circular. Nevertheless, the portfolio has witnessed limited seasoning and has a short legacy compared with average tenure of 10 years and recent scaling -up of the portfolio. SGRL had 6.2% of AUM under restructuring as on December 31, 2021, out of which only 1.6% had loan-to-value (LTV) ratio of more than 80%.
Furthermore, SGRL targets women who are in the low-income group and economically weaker section and who are employed in the informal sector and may lack clear title to the property. Given that the target customer segment has limited financial flexibility in times of distress, on account of relatively high risk compared with traditional home finance companies, the delinquencies are expected to increase from current levels as scale increases and the portfolio seasons. Nevertheless, asset quality should benefit from the granular and secure nature of the portfolio with LTV of less than 40% for around 90% of the portfolio. However, the ability to manage the asset quality will need to be demonstrated over a longer period.
Also, the company needs to demonstrate its ability to improve profitability on a sustained basis. The company broke even in fiscal 2020, with net profit of Rs 1.0 crore, compared with loss of Rs 3.8 crore in fiscal 2019, as the scale, and operational efficiency improved. Net profit was Rs 9 crore for fiscal 2021 and Rs 5 crore for the nine months ended December 31, 2021. In the company’s target segment, yields remain high but the ability to control credit costs and operating expenses will be the key determinants of profitability, over the medium term. At the same time, access to relatively low-cost funding line is expected to support the profitability metrics. |
Liquidity : Adequate The structural liquidity statement (excluding unutilised bank lines) of SGRL had positive mismatches in all of the buckets, as on December 31, 2021. The company had overall liquidity cushion of Rs 125 crore with Rs 54 crore in cash balance and Rs 81 crore of unutilised bank lines, as on December 31, 2021, which adequately cover the scheduled debt obligation of Rs 20 crore until the end of June 2022. |
Outlook: Stable SGRL is expected to maintain adequate capitalisation over the medium term. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company SGRL was incorporated in July 2011, and received its housing finance company license in January 2015. It operates in the affordable segment and has an average ticket size of Rs 2.65 lakh. The company caters to people employed in the informal sector who have informal property titles and are residing mainly in urban and peripheral-urban areas. It is headquartered in New Delhi and operates through 36 branches across eight states as on December 31, 2021. It operates under the brand ‘Sitara, a SEWA initiative’.
SGRL is embedded within the Gujarat-based trade union - SEWA network (Self Employed Women Association). SEWA was established in 1972 and aims to organise women employed in the informal sector in order to provide them with security of work, income, social equality, and food. The company promotes women’s ownership of assets, in line with the philosophy of its promoter.
SMBT (90% of which is held by RNT Associates) which owns 26.7%, is the promoter of the company. Other major shareholders include WWB (20.6%), Oikocredit (19.1%), Omidyar (11.7%), HDFC Holdings (7.0%), AHI Capital (6.1%) and HDFC Life Insurance (5.2%). |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 15-Mar-2022 in line with the lender-wise facility details as on 07-Aug-2021 received from the rated entity.
Criteria Details
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