| Standard Chartered Capital Limited | ||||||
| 'CRISIL AAA/Stable' assigned to Non Convertible Debentures | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL AAA/Stable’ rating on Rs.500 crore Non Convertible Debentures of Standard Chartered Capital Limited (SCCL; erstwhile Standard Chartered Investments & Loans Limited) and reaffirmed its ratings on the existing bank facilities and debt instruments at 'CRISIL AAA/Stable/CRISIL A1+'.
The ratings continue to factor in support from Standard Chartered Bank, UK (SCB; rated 'A+/Stable/A-1' by S&P Global Ratings). CRISIL Ratings' believes that SCCL will continue to be held by SCB, UK and that timely support, if required, will be made available to SCCL by its parent, being of high strategic importance to SCB, UK’s India franchise. |
Analytical Approach CRISIL Ratings’ credit rating on the Indian affiliates of global financial institutions (GFIs) centrally factor in the strong expectation of support from their parent. The rating framework for such affiliates takes into account the following factors: assessment of the global operating environment and its impact on the credit risk profiles of GFIs; S&P Global’s ratings on GFIs; translation of S&P Global’s ratings on the parent entity into CRISIL Ratings’ credit rating scale; and the standalone credit quality of the respective Indian operations. For SCCL, CRISIL has factored in the strong expectation of support from its parent, SCB, UK. |
Key Rating Drivers & Detailed Description Strengths:
SCCL is a wholly owned subsidiary of Standard Chartered Bank, UK. The ratings centrally factor in the strong support from the parent, SCB UK. SCCL is an independent entity managed and governed by its Board of Directors with all the business and administrative decisions delegated to the CEO by its Board. SCCL’s Board of Directors are comprised of SCCL CEO, independent directors and representatives from SCB. Further SCB provides guidance to SCCL’s management in the company’s strategic decision-making. SCCL’s risk management policies, systems and processes are aligned with Standard Chartered group’s global policies. Besides being well capitalised, SCCL also sources funds from other banks and financial institutions and it has credit line arrangement with SCB India to be used only in case of a contingency. SCB UK’s ownership ensures that SCCL will remain adequately capitalised. CRISIL Ratings believes that the strategic importance and 100% ownership of SCCL by SCB UK implies a strong moral obligation on the parent to continue to support its subsidiary both on an ongoing basis and in times of distress.
SCCL’s capitalisation is healthy with networth of Rs 1033 crore and low gearing of 3.2 times as on December 31, 2021 (Rs 975 crore and 2.3 times as on March 31, 2021). Gearing is expected to increase gradually with increase in loan portfolio, but will remain below 5 times over the medium term. Given the increasing importance of SCCL to the SCB, CRISIL believes SCB will infuse equity capital in the company to support its growth plans over the medium term as required. Furthermore, healthy capitalisation continues to provide a cushion against any asset-side risks.
Weaknesses:
SCCL’s portfolio performance is sensitive due to limited nature of granularity of its loan exposures. The top 20 exposures constitute 54% of the loan book as on December 31, 2021; although this has reduced significantly from 63% as on March 31, 2021. However, the company is planning to gradually increase its retail book in the near-term. As on December 31, 2021, the loan book stood at Rs 4,097 crore, a strong growth of 34% over March 31, 2021. This has been partly led by the retail loan book. As on December 31, 2021, around 17.7% of the loan book comprised of retail loan against securities (LAS) or loan against property (LAP) (12.3% as on March 31, 2021). With the increase in its retail loan book, the client granularity is set to improve which would address the portfolio sensitivity.
The company reported gross NPAs of 0.35% as on December 31, 2021, as against 0.5% March 31, 2021. The entire NPA came from a single account which became overdue in the last fiscal. In addition, there was one account constituting 2.8% of the loan book, which was current before it opted for one-time restructuring under RBI’s circular on Resolution Framework for Covid-19-related Stress, issued in August 2020. The restructuring plan for the said account was approved under guidance of above said circular in March 2021. During fiscal 2022, the borrower repaid the entire proceeds and the account has been closed.
In terms of collections, the company has performed fairly well, even during the pandemic. The collection efficiency for book remained 100% or above across the year. Profitability may be adversely impacted if incremental stress is witnessed in the loan portfolio and as a result, asset quality and profitability performance needs to be demonstrated through cycles. While the company plans to diversify its portfolio mix by increasing its retail and SME business portfolio, till this scales up, asset quality will be key monitorable.
As on December 31, 2021, the short term borrowing, mainly Commercial paper (CP), comprised around 60% of borrowing mix (69% as at March 31, 2020). This is matched by short term loans in the form of Loan against securities (LAS). However, CRISIL Ratings notes that the maturity profile of said CPs are staggered. Historically, CRISIL Ratings have noted that maturity over rolling 30 days period has rarely exceeded Rs 600 crore, being the quantum of contingency line of credit available from SCB India. SCCL has also diversified its borrowing profile to include borrowings in the form of long-term NCDs as well as long-term bank borrowings over the past few years. The share of bank lines and non-convertible debentures has increased from 13% as of March 31, 2019 to 38% as of December 31, 2021. |
Liquidity: Superior Asset liability maturity (ALM) profile for SCILL is adequate with cumulative positive gaps in upto 1 year bucket as per the ALM as on December 31, 2021. As on January 31, 2022, the company has repayments of around Rs 773.5 crores till March 2022, of which Rs 740 crore constituted CP and CC/WCDL, which subsequently gets rolled over. Against this the company has cash and cash equivalents of ~Rs 216 crore and unutilised bank lines of Rs 620 crore (including Rs 600 crore from SCB India). |
Outlook: Stable CRISIL Ratings believes that SCCL will continue to benefit from the support that it receives from its parent, Standard Chartered Bank. |
Rating Sensitivity factors Downward Factors
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About the Company SCCL is a wholly-owned subsidiary of SCB, UK. SCCL was incorporated in 2003 to leverage the Standard Chartered group’s sizeable Indian operations in the financial services segment. The company is registered with the Reserve Bank of India as a non-deposit-taking, systemically-important, non-banking financial company. It primarily focuses on segments such as promoter financing, lease rental discounting, and other secured corporate loans. The company plans to diversify its portfolio mix by increasing its retail and SME business over the medium term.
SCCL’s risk management policies, underwriting standards and procedures are in line with SCB’s global policies. The SCCL risk team consist of seasoned professionals with average experience of over 15 years in the retail and corporate segment. The governance management in Risk is through the Credit and Risk committee which is conducted at regular interval and is chaired by SCCL Directors and Independent Directors. |
Key Financial Indicators
*annualised |
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)
^Yet to be issued |
| 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 01-Jun-22 in line with the lender-wise facility details as on 12-Aug-21 received from the rated entity.
Criteria Details
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