· Commercial Paper
*Instrument details are provided in Annexure-1
Rated Amount (Rs. Crore)
ICRA has assigned a short-term rating of [ICRA]A1+ (pronounced ICRA A one plus)† to the Rs. 4,000 crore Commercial Paper programme of Indiabulls Commercial Credit Limited (ICCL).
† For complete rating scale and definitions, please refer to ICRA’s website www.icra.in or other ICRA Rating Publications.
The rating factors in ICCL’s strong parentage (wholly owned by Indiabulls Housing Finance Limited, IBHFL, rated [ICRA]AA+/Stable/A1+), the strong operational linkages and demonstrated track-record of support from the parent. IBHFL is the third largest housing finance company in the domestic mortgage market with a portfolio of Rs. 81,422 crore as on December 31, 2016. The rating also factors in ICCL’s robust risk management systems and processes which are in line with those of IBHFL, strong capitalisation levels, comfortable liquidity profile and comfortable asset quality indicators. ICRA however takes note of the company’s limited track record, small scale of operations and its portfolio concentration with loan against property (LAP) forming ~70% of total portfolio as on December 31, 2016. Going ahead, any reduction in IBHFL’s holding in ICCL will remain a key rating monitorable.
Key Rating Drivers
Strong parentage; operational and financial support from IBHFL
· Strong and experienced management team with varied experience in financial services segment
· Comfortable capitalisation levels for medium term growth
· Comfortable asset quality indicators
· Adequate liquidity profile at the group level
· Robust risk management systems and processes, in line with those of IBHFL
· Limited track record and small scale of operations
· Concentrated portfolio with LAP forming ~70% of the loan book as on December 31, 2016
Description of key rating drivers highlighted above:
During FY2016, the company merged with another NBFC of the group viz. Indiabulls Finance Company Private Limited. While ICCL currently lends only to the LAP segment with ticket sizes greater than Rs. 1 crore, there are some legacy commercial vehicle exposures and builder loans on its books which are expected to run down with time. ICCL’s total assets under management stood at Rs. 2,604 crore as on December 31, 2016, of which LAP and builder loans formed ~97% while the legacy CV exposures comprised the rest.
IBHFL’s assets under management registered a CAGR of 26% from March 2013 to December 2016, to stand at Rs. 81,422 crore as on December 31, 2016. As on December 31, 2016, 56% of the loan book was on account of home loans, 23% from loans against property (LAP) and the remaining 21% corporate mortgage loans. Over the past two years, the share of retail mortgage loan book in the company’s portfolio remained stable at ~79%. The company discontinued fresh disbursement of commercial vehicle loans in FY2014 and this loan book has largely run down since then. Within home loans, the company continues to focus on the salaried segment (~75% of the housing book). While the LAP segment is comparatively risky, the company has strong systems and processes to manage this business. The corporate mortgage loan book includes lease rental discounting (LRD) loans to builders (59% of corporate loans as on December 31, 2016), and construction finance (41%). Given the large ticket size and the high inherent risks associated with these exposures, the corporate mortgage loan book remains exposed to concentration risks. Moreover, recoveries in this segment take longer time and may not be as easy as in case of retail mortgage loans. IBHFL’s reported asset quality indicators remained stable with gross and net NPAs of 0.85% and 0.36% respectively as on December 31, 2016 (0.84% and 0.35% respectively as on March 31, 2016).
IBHFL remains well capitalised with a tangible net worth of Rs. 11,786 crore on a consolidated basis as on December 31, 2016. The company has a gearing of 7.06 times as of December 31, 2016 as compared with 7.53 times as of March 31, 2015. IBHFL’s capitalisation profile remains comfortable with a capital adequacy ratio of 22.02% as on December 31, 2016, providing adequate cushion for growth while maintaining the regulatory capital adequacy requirement (of CAR of 12%).
IBHFL has a diversified resource profile with a rising share of debt market instruments in its overall funding profile. The share of debt market instrument increased from 38% as on March 31, 2015 to 56% as on December 31, 2016. As on December 31, 2016, bank loans and bonds met almost 41% and 44% respectively of the IBHFL’s borrowing requirements with commercial papers and external commercial borrowings forming 12% and 3% respectively of the total borrowings. IBHFL’s liquidity profile is also supported by its policy to maintain un-utilised short term bank lines and liquid investments in the form of fixed deposits and investments in liquid mutual funds, together accounting for disbursements over the next six months.
IBHFL’s average yields declined slightly during FY2016 to 14.4% from 14.6% during FY2015 with an easing of interest rates on the incremental loans disbursed. Supported by a 32 bps decline in cost of funds, the interest spreads increased to 5.1% for FY2016 from 4.5% for FY2015. The company’s operating expenses remained low at 0.9% of ATA in FY2016. Stable net interest margins (4.8% for FY2016), non-interest income (1.6% for FY2016), and operating expenses (0.9% for FY2016) led to a stable operating profitability (5.4% for FY2016) for the company. IBHFL’s profitability indicators remained robust with consolidated PAT at Rs. 2,345 crore (3.5% of ATA) in FY2016, a 23% rise from Rs. 1,901 crore in FY2015 (3.7% of ATA). During 9M FY2017, the company reported a consolidated PAT of Rs. 2,066 crore (3.1% of ATA).
Analytical approach: For arriving at the rating, ICRA has taken a consolidated view of IBHFL and its wholly owned subsidiary ICCL given the high degree of operational and managerial linkages and shared brand name.
Links to applicable Criteria
ICRA’s Credit Rating Methodology for Non-Banking Finance Companies
Set-up in July 2006, Indiabulls Commercial Credit Limited (ICCL, formerly Indiabulls Infrastructure Credit Limited) is registered with Reserve Bank of India as non-deposit accepting non-banking finance company and is a wholly owned subsidiary of IBHFL (rated [ICRA]AA+/Stable/A1+). The company extends loans against properties. During FY2016, the company merged with another NBFC of the group viz. Indiabulls Finance Company Private Limited.
During FY2016, ICCL reported a net profit of Rs. 51 crore on a total income base of Rs. 384 crore. During 9MFY2017, ICCL reported a net profit of Rs. 52 crore on a total income of Rs. 270 crore.
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History for last three years:
Table: Rating History
Name of Instrument
Chronology of Rating History for the past 3 years
Commercial Paper Programme
Complexity level of the rated instrument:
ICRA has classified various instruments based on their complexity as “Simple”, “Complex” and “Highly Complex”. The classification of instruments according to their complexity levels is available on the website www.icra.in
Details of Instrument
Name of the Instrument
Date of Issuance
Size of the Issue
Current Rating and Outlook
Commercial Paper Programme
Source: Company Data
For further details please contact:
Mr. Karthik Srinivasan (Tel. No. +91 22 6114 3444)
Ms. Samriddhi Chowdhary (Tel. No. +91 22 6169 3331)
Mr. Kushal Modi (Tel. No. +91 22 6114 3428)
Mr. Chirag Sureka (Tel. No. +91 22 6114 3424)
Mr. L. Shivakumar (Tel. No. +91 22 6114 3406)
About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.
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