RE Ratings - PDF document

1 1 CA RE Ratings Limited
1 CA RE Ratings Limited Press Release Roha Housing Finance Private Limited December 10, 2020 Ratings Facilities Amount (Rs. crore) Rating 1 Rating Action (1) Long Term / Short Term Bank Facilities * 1 3.00 CARE A - (CE); Stable / CARE A2+ (CE) [Single A Minus (Credit Enhancement)] ; Outlook: S table / A Two Plus (Credit Enhancement)] Reaffirmed (2) Long Term / Short Term Bank Facilities * # 20.00 CARE A - (CE); Stable / CARE A2+ (CE) [Single A Minus (Credit Enhancement)] ; Outlook: Stable / A Two Plus (Credit Enhancement)] Final Rating Assigned (3) Long Term / Short Term Bank Facilities *^ 17.00 Provisional CARE A - (CE); Stable / CARE A2+ (CE) [Provisional Single A Minus (Credit Enhancement) ; Outlook: Stable / A Two Plus (Credit Enhancement)] Reaffirmed Total Facilities 50 .00 (Rs. Fifty Crore Only) Details of instruments/facilities in Annexure - 1 *The facilities are proposed to be backed by an unconditional and irrevocable corporate guarantee to be provided by Roha Dyechem Private Limited (rated ‘CARE A - ; Stable / CARE A2+’) #Final rating assigned upon receipt of executed guarantee documents ^The rating is provisional and will be confirmed upon receipt of executed guarantee documents to the satisfaction of CARE Unsupported Ratings CARE BBB - ; Stable /CARE A3 ( Triple B M inus; Outlook Stable / A Three ) Detailed Rationale & Key Rating Drivers for the credit enhanced debt The ratings assigned to the bank facilities (mentioned under (1) & (2) above) of Roha Housing Finance Private Limited (RHFPL) factors in the credit enhan cement in the form of unconditional and irrevocable corporate guarantee provided by Roha Dyechem Private Limited (RDPL; rate d ‘CARE A - ; Stable / CARE A2+’). The proposed bank facilities are also expected to be backed by a proposed credit enhancement in the form of unconditional and irrevocable corporate guarantee to be provided by RDPL. For detailed credit risk assessment of RDPL, please refer to press release of RDPL uploaded on CARE’s website. Detailed Rationale & Key Rating Drivers of Roha Dyechem Limi ted The ratings assigned to the bank facilities of Roha Dyechem Private Limited (RDPL) continues to factor in RDPL’s established position in the food color market both in domestic market and exports market, experience of promoters in chemical industry and diversified revenue profile with revenue being contributed from both chemical and renewable FY19 in its chemical division coupled with stable cash flow from renewable power division owing to in place power purchase agreements, albeit the payments in wind segment continue to remain delayed. RDPL continues to have high quantum of exposure to its group entities, further the networth as on Ma r 31, 2019 also is marred by demerger of real - estate division in FY19 translating into elevated leverage. However, the debt coverage indicators like Total Debt to PBILDT and Total debt to Cash flow from Operations continues to remain comfortable. CARE beli eves, debt coverage 1 Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications. 2 CA RE Ratings Limited Press Release indicators are expected to witness moderation in medium term as RDPL is undertaking the predominantly debt fun

2 ded project in its chemical division. T
ded project in its chemical division. This also exposes company to project related risks like implementation and stabilization risk associated with the project. The above ratings strengths are however, tempered by RDPL’s elevating group company exposure, elongated operating cycle, exposure of the profit margins to raw material volatility and forex fluctuation risk. Further, given the fact that RDPL’s operations spread across multiple countries through its subsidiaries and branches in large number of countries which include USA, U.K, Indonesian, Russia, Thailand, Vietnam, Australia, etc, prolonged impact of COVID - 19 if any , thereby significantly impacting RDPL’s business would remain critical from credit perspective and hence a key monitorable. Detailed Rationale & Key Rating Drivers of Roha Housing Finance Private Limited The unsupported rating assigned to bank facilities of Roha H ousing Finance Private Limited (RHFPL) primarily factors in continuing strong support from the flagship company of the group – Roha Dyechem Pvt Ltd , moderate gearing as the company increases leverage to scal e up its operations and granular nature of the lo an portfolio . CARE expects continuing support from the Roha Dyechem Pvt Ltd to RHFPL as common brand name establishes strong motivation and intent of the group to support the venture, especially in times of stress. In addition, RDPL , which is the group’s f lagship company, has demonstrated its support by providing corporate guarantee to some of the sanctioned bank lines of RHFPL. The rating also factors in healthy capital infusion by the group during the initial stages of operations. The ratings are constrai ned on account of nascent sta ge of operations with about three years of operations, moderate asset quality with low seasoning of loan portfolio, low profitability as the company in yet to achieve scale of operations, geographical concentration and lack of promoter experience in running financial services business Rating sensitivities Positive factors: Factors that could lead to positive rating action/upgrade:  Significant improvement in scale of operations with robust asset quality  Sustained improvement in profitability Parameter with ROTA of more than 1.5%  Improvement in g eographical diversification Negative factors: Factors that could lead to negative rating action/downgrade:  Deterioration in asset quality parameters with Gross NPA ratio above 5%  Deterio ration in capitalization levels with decline in cushion over regulatory minimum Capital Adequacy Ratio  Deterioration in profitability parameters on a sustained basis Detailed description of the key rating drivers of RHFPL Key Rating Strengths Experienced management team The board of RHFPL comprises of senior personnel having experience in the financial services. The operations of the company are headed by Mr. Sunil Kapoor (Managing Director and Chief Executive Officer; MD & CEO) of RHFPL. Mr. Kapoor was p reviously associated with Capri Global Capital Ltd as the Executive Director. Mr. Kapoor has over 27 years of experience, having been associated with American International Group (AIG), Roha Housing Finance Pvt Ltd , Citigroup, GE Money, American Express ( AMEX), Capri Global Capital Limited, Siemens, Bharti AXA Life Insurance and Godfrey Phillips in the past. Mr. Jyotin Shastri ( Non - Executive Director) of RHFPL,

3 has over 18 years of work experience an
has over 18 years of work experience and was previously associated with the Prince Group as the Chief Financial Officer (CFO). He has been with the Roha Group for the last 3.5 years, handling the financial activities of the Flagship Company and its various global subsidiaries. Mr. Neeraj Modi (Non - Executive Director ) of RHFPL, has been associated w ith the Roha Group for the past 7 years as Finance Head for the Renewable Energy Business. Comfortable capital a dequacy and low gearing levels The company is in initial stages of operations and has completed over three years of operations. The promoters h ave been regularly infusing equity capital into the company to support growth in business. The promoter group has in fused equity capital of Rs.5 crore d uring FY20 and Rs.44.51 crore in H1FY21 . As a result, the company’s tangible net worth stood at Rs. 90.51 crore as on March 31, 2020 and Rs.136.6 8 crore as on September’30, 2020 . As a result of capital infusion and limited debt raised via term loan, the company’s overall gearing was 1.27 times and it reported Capital 3 CA RE Ratings Limited Press Release Adequacy Ratio (CAR) of 100.59% as on Marc h 31, 2020. Further capital infusion by promoters of Rs.45 crore in September’20, increased overall CAR to 118.84% and reduced debt equity to 0.71 times as on September 30, 2020 . Low client concentration The main target segment of the company is economica lly weaker section and low income group customers. Average ticket size in the home loans segment is Rs.9 lakh and in the LAP segment is Rs.10 lakh. Considering low ticket size of loan products for these segments, company does not face any client concentrat ion risk. Overall, Rs.149.21 crore of loan portfolio is spread across 1769 customers as on March 31, 2020 . As on September 30 , 2020, t op 20 customers constituted 3.13 % of the company’s loan portfolio. Moderate resource profile The company had total debt o f around Rs.98 crore as on Sep tember 30, 2020, comprising of t erm loan s from various banks and financial institution. The company has been able to raise borrowings backed by the guarantee of RDPL as well as NHB in the last 6 months. However, diversificatio n of lenders and sources shall be key monitorable as the company scales up its business operations. Rating Weakness: Small size of operations with limited track record of the company RHFL commenced its business as a HFC in FY18 and achieved a loan book si ze of Rs. 149.2 crore by March 31, 2020 and Rs.182.21 crore by September 30, 2020 . Home loans comprise 77% of the portfolio, while LAP comprised the remaining 23%. I n FY20, the company has disbursed around Rs.68.09 crore while till the month of October’20 company has disbursed Rs.44.46 crore . Going forward, the ability of the company to scale up its operation while maintaining robust asset quality shall be a key monitorable. Geographical concentration The company faces geographical concentration risk as ma jority of its loan exposure is in the Madhya Pradesh and Gujarat region. Around 74.67 % of the loans outstanding as on March 31, 2020 were in the Madhya Pradesh (38.25%) and Gujarat region (36.41%) . The company also faces high concentration risk in loan pr oduct and segment. The company is into providing home loans and LAP, which are of low ticket size. Due to focus on low ticket loans, compa

4 ny faces segment concentration in its p
ny faces segment concentration in its portfolio. Economically weaker segment customers are prone to higher risk in cas e of economic downturns . Low seasoning of portfolio with asset quality performance to be seen Company commenced operations as a HFC in March 2017, commenced lending operations in March 2018. Owing to the initial years of operation, the loans disbursed in the last couple of years are yet to be seasoned given the long term nature of the product. However, the target segment of the company being low and middle income group, the company’s ability to maintain the asset quality during times of economic downturn b y means of strong credit appraisal policies remains a key rating sensitivity. As on March 31, 2020, Company reported GNPA of 0.29% and NNPA of 0.11% while on September 30, 2020, company reported GNPA of 0.25% and Nil NNPA. Rising competition in low income housing finance segment Over the last few years, many new HFCs backed by private equity players and or strong promoters with a focus on affordable housing have started operations. Apart from established HFCs, banks have also been increasingly shifting thei r focus towards retail asset classes such as mortgage finance owing to their stress in corporate finance portfolio. However, risk of competition is somewhat mitigated by large untapped affordable housing market. 4 CA RE Ratings Limited Press Release Analytical Approach: The ratings of the ban k facilities of RHFPL are based on the assessment of RDPL which has proposed to give unconditional and irrevocable corporate guarantee to facilities of RHFPL. RDPL has been assessed on a standalone basis. CARE has adjusted the net - worth of RDPL for the exp osure to group companies which includes investments, loans advances and unsecured loa ns. Applicable Criteria: Criteria on as signing outlook to credit ratings Consolidation and Factoring Linkages in Ratings CARE’s Policy on Default Recognition Criteria for Short Term Instruments Criteria for Housing Finance Companies Financial Ratios – Financial Sector Liquidity: Moderate Being in the initial stage of operations , company has overall gearing of 0.71 times as on September30, 2020 . C ompany has debt repayment due of Rs.20.59 crore upto September 30, 2021 against which company has cash and bank balan ce (inclusive of FD net of OD) of Rs.54.47 crore as on September 30, 2020 . Regular support from parent by way of capital is evident by past capital infusion. Also, collection efficiency of the company impro ved post moratorium period to 94% in the month of September ’2020. About the Company – Roha Dyechem Limited Established in 1972, Roha Dye Chem Private Limited (RDPL) , is promoted by Mr Ramak ant Tibrewala and Mr Shrikant Tibrewala. RDPL is in to manufacturing of food grade colour which find application in dyes and intermediates for food & beverages, pet food, animal feed, cosmetics. RDPL has a global presence with offices in 24 countries. The company also operates Solar plants (Including captive 10 MW) aggregating 63.5 MW and Wind energy plants with an aggregate operational capacities of 31.5 MW across various locations. Most of the plants have long term PPA (Power Purchase Agreements) which pr ovides revenue visibility to that exte nt . About the company - Roha Housing Finance Private Limited RHFPL was incorporated on March 31, 2017 with its registered office

5 in Mumbai. RHFPL is principally engaged
in Mumbai. RHFPL is principally engaged in the business of providing affordable housing f inance. The company obtained its registration from National Housing Bank (NHB) on December 12, 2017 and started its business in March 2018. Currently the company’s loan portfolio is spread across 5 states (Maharashtra, Gujarat, Chhattisgarh, Madhya Pradesh and NCR ) and 15 branches in the country During September’20, promoter group has infused equity capital of around Rs.45 crore post which shareholding of the company was JJT Trust (Mr. Ramakant Tibrewala is the nominee) – 74.16%, Roha Inkjet Private Ltd – 2 4.00%, Shrikant Tibrewal – 1.84% as on Septmeber 30, 2020. As on September 30, 2020 , the company had loan portf olio of Rs.182.21 crore. Mr. Sunil Kapoor is the Managing Director & Chief Executive Officer of the company. Mr. Kapoor has over 27 years of expe rience in the financial sector and was previously associated with Capri Global Capital Ltd as an Executive Director. Brief Financials of RHFPL : Particulars (Rs. crore) FY19 (A) FY20 (A) Total income 12.28 26.29 PAT ( 8.50) 1.37 Total Assets * 173.79 208.75 Net NPA (%) 0.09 0.11 ROTA (%) (9.12) 0.72 A: Audited ; * Total Assets are adjusted total assets. All ratios are as per CARE Calculations. Note: The company st arted operations in March, 2018 5 CA RE Ratings Limited Press Release Status of non - cooperation with previous CRA : Not Applicable Any other information : Not Applicable Rating History for last three years : Please refer Annexure - 2 Annexure – 1 : Details of instruments / facilities: Name of the Instrument Date of Issuance Coupon Rate Maturity Date Size of the Issue (Rs. crore) Rating assigned along with Rating Outlook Fund - based - Long Term/ Short Term - Proposed NA NA NA 17.00 Provisional CARE A - (CE) 2; Stable / CARE A2+ (CE) 2 Fund - based - Long Term 31 - 07 - 2019 10.55 July, 2024 9.00 CARE A - (CE); Stable Fund - based - Short Term - - - 4.00 CARE A2+ (CE) Fund - based – Long /Short Term 26 - 06 - 2020 10.70 July, 2024 20.00 CARE A - (CE); Stable / CARE A2+ (CE) Un Supported – Un Supported Rating (LT/ ST) - - - 0.00 CARE BBB - ;Stable /A3 Annexure – 2: Rating history of last three years: Sr. No. Name of the Instrument/Bank Facilities Current Ratings Rating history Type Amount Outstanding (Rs. crore) Rating Date(s) & Rating(s) assign ed in 2020 - 2021 Date(s) & Rating(s) assigned in 2019 - 2020 Date(s) & Rating(s) assigned in 2018 - 2019 Date(s) & Rating(s) assigned in 2017 - 2018 1. Fund - based - LT/ ST - Term loan LT/ST 17.00 Provisional CARE A - (CE); Stable / CARE A2+ (CE) 1)Provisional C ARE A - (SO); Stable / CARE A2+ (SO) (03 - Apr - 20) 1)Provisional CARE A - (SO); Stable / CARE A2+ (SO) (17 - Apr - 19) - - 2. Fund - based - LT/ ST - Term loan LT/ST 13.00 CARE A - (CE); Stable / CARE A2+ (CE) 1)CARE A - (CE); Stable / CARE A2+ (C E) (03 - Apr - 20) - - - 3 Fund - based - LT/ ST - Term loan LT/ST 20.00 CARE A - (CE); Stable / CARE

6 A2+ (CE) 4. Un Supported
A2+ (CE) 4. Un Supported Rating - Un Supported Rating (LT/ST) LT/ST 0.00 CARE BBB - ;Stable / CARE A3 10 CARE BBB - ;Stable / CARE A3 (03 - Apr - 20) - - - 6 CA RE Ratings Limited Press Release Annexure - 3: Complexity level of various instruments rated for this company Sr. No. Name of the Instrument Complexity Level 1. Fund - based - LT/ ST - Term loan Simple 2. Un Supported Rating - Un Supported Rating (LT /ST) Simple Note on complexity levels of the rated instrument : CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welco me to write to care@carerati ngs.com for any clarifications. Contact us Media Contact Name – Mr. Mradul Mishra Contact no. – +91 - 22 - 6837 4424 Email ID – mradul.mishra@careratings.com Analyst Con tact Name – Mr. Mitul Budhbhatti Contact no. – +91 - 9725040966 Email ID – mitul.budhbhatti @careratings.com Name - Mr. Abhijit Urankar Contact no. – +91 - 9819229374 Email ID – abhijit.urankar@careratings.com Business Development Contact Name – Mr. Ankur Sachdeva Contact no. – +91 - 22 - 6754 3495 Email ID – ankur.sachdeva@careratings.com About CAR E Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating t hat helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk - return expectations. Our rating and grading service offerings leverage ou r domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any informati on and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facili ties/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in cas e of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. **For detailed Rationale Report and subscription information, please contact us at www.careratings.co