| Vivriti Capital Limited | ||||||
| 'CRISIL A+/Stable' assigned to Non Convertible Debentures; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| & Proposed public issue of retail NCD | ||||||
| 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 assigned its ‘CRISIL A+/Stable’ rating to Rs.500 crore of non-convertible debentures (NCD) of Vivriti Capital Ltd (VCL) and reaffirmed its ‘CRISIL A+/Stable/CRISIL A1+’ ratings on the outstanding bank facilities and debt instruments of the company
The rating is driven by the healthy capitalisation of the company, adequate risk management practices, and improving earnings profile. These strengths are partially offset by the limited track record of lending operations in the retail and non-financial segments, and susceptibility to inherent vulnerability associated with the wholesale segment.
Assets under management (AUM, standalone) stood at Rs 5,836 crore as on March 31, 2023 (Rs 6,888 crore as on December 31, 2023), vis-à-vis Rs 537 crore as on March 31, 2019 – posting a 4-year compound annual growth rate of 82%. Overall financial risk profile of VCL is supported by its healthy capitalisation metrics with demonstrated ability of VCL to raise capital at regular intervals from high pedigree investors. As on December 31, 2023, the company had a networth of Rs 1,817 crore (including preference shares) with a comfortable overall capital adequacy ratio (CAR) of 23.6% and adjusted gearing of 3.2 times. The company reported a net profit of Rs 129 crore in fiscal 2023 and Rs 128 crore in nine-month period ended December 31, 2023, translating in to return on managed assets (RoMA) of 2.2% and 2.3% (annualised), respectively. Adjusting for the gain on sale of shares in associate company (Credavenue Pvt Ltd; Yubi) RoMA stood at 2.0% for both the periods. |
Analytical Approach CRISIL Ratings has assessed the standalone credit profile of VCL to arrive at the ratings. CRISIL Ratings understands that its subsidiary - Vivriti Asset Management Ltd (VAML; 66.8% held by VCL) has fairly independent operations with some shared functions and Yubi (a 50.8% associate of VCL) operates as an independent company altogether. Further, VCL also has no pre-emptive rights to infuse further capital in Yubi and does not exercise oversight on the entity. As per the company’s stated policy, VCL’s investment in subsidiaries will be capped at 10% of its networth. |
Key Rating Drivers & Detailed Description Strengths: Healthy capitalisation with demonstrated track record of raising capital at regular intervals VCL is well-capitalised with regard to its scale and nature of operations and has a demonstrated track record of raising equity at regular intervals. From Rs 8 crore as on March 31, 2018, the company’s standalone networth has increased to Rs 1,817 crore as on December 31, 2023. CAR was comfortably above the regulatory requirement at 23.6% as on December 31, 2023, along with a standalone adjusted gearing of 3.2 times.
VCL has cumulatively raised Rs 1,399 crore as equity, out of which Rs 597 crore was from the LGT group, Rs 480 crore from Creation Investment LLC (Creation), and balance from TVS Capital funds. Capital position benefits from the presence of high pedigree investors, who have demonstrated their support since the company’s inception.
In its related entities – VAML and Yubi, VCL has so far invested Rs 78 crore and Rs 50 crore, respectively. Capital requirement in VAML could be low given the nature of business; nevertheless, VCL would extend support, basis growth plans of the subsidiary. In Yubi, VCL would not be participating in further equity rounds and hence, its shareholding would continue to come down. Overall, as per the board policy, investment in subsidiaries will be limited to 10% of networth at all points of time.
On a steady-state basis, the company intends to operate at a standalone gearing level of 4 times or below. The company does plan to raise further equity over the near to medium term, which would support its growth plans, while ensuring the capitalisation remains healthy. Quantum of capital and timelines allied to it, will be key monitorables.
Adequate risk management practices Considerable experience of the management team has enabled VCL to set up a diligent risk management framework and post-disbursal risk monitoring process. The company was founded by Mr Vineet Sukumar and Mr Gaurav Kumar, who have extensive experience around institutional lending and debt management – particularly within the financial sector. VCL has put in place an exhaustive framework for due diligence by combining the risk assessment capabilities of external service providers and building models and suitable tech platforms in-house. The company’s underwriting process starts with a preliminary risk evaluation by the credit and risk team after which, potential leads are passed on to the business team. Thereafter, the risk and credit team independently evaluate the prospective borrower and make independent recommendations to the credit committee, which takes the final call.
In terms of other checks and balances, the company follows a single borrower exposure ceiling of Rs 40 crore and a single group borrower ceiling of Rs 60 crore. For sub-sectors, an internal exposure cap of 20% has been set to ensure granularity in the portfolio. The company has brought down the share of the top 20 exposures in its AUM to 14% in December 2023, from 41% in March 2020. In terms of sectoral exposure, consumer loans formed 33% (7% from institutional lending and remaining 26 from retail) of the AUM as on December 31, 2023. Lending to microfinance institutions stood at ~5% of the overall AUM as of December 2023, reduced from 30% in March 2020.
Reported NPAs witnessed an inch up with gross and net NPAs at 0.9% and 0.3%, respectively as on December 31, 2023 as compared to 0.3% and 0.1%, respectively, as on March 31, 2023. The inch up was primarily due to few slippages in the enterprise segment and the management is taking adequate measures to recover.
Thus far, the company’s risk management systems have supported its overall asset quality. However, unlike its proven underwriting capabilities within the financial sector space, VCL’s expertise of due diligence in the non-financial segment - as this portfolio scales - is yet to be tested.
Improving earnings profile RoMA, after remaining sub 1% till fiscal 2020, has been improving since. It stood at 2.2% in fiscal 2023 and 2.3% (annualised) for the nine-month period ended December 31, 2023. While RoMA was buoyed in nine-month period ended December 31, 2023 by a gain on sale of shares in the associate company, increase in credit cost due to slippages pulled profitability downwards. Adjusting for the onetime gain, RoMA stood at 2.0% (annualised) for both fiscal 2023 and nine-month period ended December 31, 2023.
Overall, improvement in profitability over the years was due to scale up in the loan book and credit cost remaining under control. The company has been able to maintain adequate spreads on its loan book while diversifying into different loan categories. VCL was also able to keep its credit cost [0.2% of average managed assets (AMA) in fiscal 2023 and 0.4% in fiscal 2022] under control with limited slippages; slippages in the current fiscal however resulted in an increase in credit cost to 1.3% in 9MFY24. Further, as the company is in the growth phase, its operating expenses (2.0% of AMA in 9MFY24 and 1.7% of AMA in fiscal 2023) are largely allocated towards setting up of team and systems. However, this metric should stabilise along with economies of scale going forward. Ability to sustain improvement in operating margin while keeping credit costs under control, is a monitorable.
Weaknesses: Limited track record of operations; performance of enterprise and retail segment remains a monitorable The company commenced operations in fiscal 2019, by extending enterprise loans to financial sector entities. Within the first year of its operations, VCL scaled its portfolio to Rs 537 crore and thereafter, has registered a 4-year CAGR of 82% to attain an AUM size of Rs 5,836 crore as on March 31, 2023 (Rs 6,888 crore as on December 31, 2023). This growth has been a factor of addition of new borrowers and expansion into newer segments.
As VCL intends to achieve a sub-sector exposure limit of 20%, it started to grow into non-financial segments. In terms of sectoral exposure, around 33% of the AUM is deployed in the financial sector as loans to MFIs and small and mid-sized NBFCs. On the retail side, the company has also expanded into co-lending and supply chain financing. Co-lending has a first loss default guarantee from lending partners while supply chain financing is completely anchor based. VCL recently forayed into factoring and leasing as well. As the company scales its business within these segments, its ability to maintain asset quality metrics will be a key monitorable.
Inherent vulnerability associated with the wholesale segment Lending exposure to institutional/wholesale segments was around 52% of the AUM as on December 31, 2023. While it has come down from 95% of the AUM in March 2020, it remains high. Further, exposure concentration in terms of top 20 borrowers has improved to 14% in December 2023, from 41% in March 2020. Though VCL has capped single exposure at Rs 40 crore and group exposure at Rs 60 crore, chunkiness of exposures and sectoral concentration makes asset quality vulnerable to shocks in case of slippages. CRISIL Ratings notes that the company has developed an in-house risk management system, supported by adequate underwriting practices and early warning systems. However, as the business scales and the company’s exposure to enterprise segment increases, the efficacy of these systems and practices will remain a monitorable. |
Liquidity: Adequate There is no negative gap on a cumulative basis across all buckets till one year as per the asset liability management statement dated December 31, 2023.
As on January 31, 2024, the company had cash and cash equivalent and liquid investments of Rs 589 crore. This along with expected collections of Rs 2,379 crore over Feb-Apr 2024 are sufficient to take care of the debt repayments of Rs 1,088 crore during the same period. |
Outlook: Stable VCL is expected to maintain healthy capitalisation and improve its earnings profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company VCL is an NBFC-ND-SI registered with the Reserve Bank of India. Founded by Mr Vineet Sukumar and Mr Gaurav Kumar, the company commenced lending operations in fiscal 2019. VCL offers institutional loans, supply chain financing, retail loans via co-lending, and has recently forayed into the leasing and factoring business. Of this, 52% comprised institutional lending to both financial sector and non-financial sector entities. The balance portfolio was deployed as retail lending through co-lending partnerships with NBFCs and supply chain financing – the share of which has increased from 5% in March 2019, to 41% as of December 31, 2023. Its subsidiary, VAML manages assets of alternate investment funds, operating in the mid-market enterprise space. Yubi, an associate of VCL, is a debt solutions platform catering to both, enterprise and retail customers.
As on December 31, 2023, VCL had an AUM of Rs 6,888 crore comprising term debt (~48%), working capital demand loan (~4%), supply chain financing (~5%), retail loans (~41%) and guarantees and off-book. |
Key Financial Indicators
*annualized ^including the one-time income realized from diluting stake in the associate company. Excluding the effect of this one-time income, the RoMA was 2.0% (annualised) in 9MFY24 and 2.0% in FY2023 |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
&Proposed public issue of retail NCD |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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