CRISIL has upgraded its rating on the debt instrument and bank facilities of Asmitha Microfin Ltd (Asmitha) to ‘CRISIL B/Stable’ from ‘CRISIL C’.
The upgrade reflects timely servicing of debt by Asmitha over the past six quarters and its improved liquidity, post finalization of its corporate debt restructuring. The company has also received approval from the corporate debt restructuring (CDR) empowered group to raise funds through securitization. CRISIL believes that this will enable Asmitha to sustain its operations outside Andhra Pradesh for a relatively longer period than previously anticipated. This in turn will enhance its ability to meet its debt obligations as per the revised repayment schedule under the CDR mechanism. The company has maintained healthy collections outside Andhra Pradesh thus far and its operations outside Andhra Pradesh are stable. CRISIL expects this trend to sustain over the medium term.
The rating continues to reflect Asmitha’s weakened financial risk profile and weak capitalization on account of high provisioning charges for the Andhra Pradesh portfolio and modest earnings. This rating weakness is partially offset by the extensive experience of its promoters in the microfinance industry.
CRISIL believes that Asmitha will retain its disbursements outside Andhra Pradesh, and maintain healthy asset quality in these regions, over the medium term. However, its credit risk profile will remain under pressure as a result of constrained funding profile and weak capitalization and earnings. The outlook may be revised to ‘Positive’ if the company substantially strengthens its capitalization through equity infusions and significantly scales up its operations outside Andhra Pradesh while maintaining healthy asset quality. Conversely, the outlook may be revised to ‘Negative’ if the company is unable to sustain its operations outside Andhra Pradesh, or its asset quality outside Andhra Pradesh declines considerably, thereby impacting its liquidity.
About Asmitha Microfin
Asmitha was set up in 2002 as a non-banking financial company. It is a microfinance institution, which offers microcredit to women. The company follows the microcredit model of Grameen Bank, Bangladesh. As on December 31, 2012, Asmitha’s loans outstanding aggregated Rs.11.8 billion (of which Andhra Pradesh accounted for around 55 percent).
For 2011-12 (refers to financial year, April 1 to March 31), Asmitha reported a net loss of Rs.1.51 billion on a total income of Rs.1.1 billion, against a profit after tax of Rs.209.7 million on a total income of Rs.4.4 billion for 2010-11. For the nine months ended December 31 2012, Asmitha reported a net loss of Rs.5.16 billion (on account of high provisioning charges for the Andhra Pradesh portfolio) on a total income of Rs.1.08 billion.
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