CRISIL has removed its rating on the debt instrument and bank facilities of Asmitha Microfin Ltd (Asmitha) from ‘Rating Watch with Negative Implications’ and has downgraded the rating to ‘C’ from ‘BB’.
The downgrade reflects a significant increase in the probability of Asmitha defaulting on its debt, subsequent to its admission for restructuring under the corporate debt restructuring (CDR) mechanism in March 2011. Asmitha has signed the debtor-creditor agreement and is negotiating with its bankers the terms of the restructuring. CRISIL expects the terms of the restructuring to be finalized over the next few months.
Although Asmitha has been repaying its debt in a timely manner thus far, CRISIL believes that there is a high likelihood of default as per the original schedule in the next few weeks despite having adequate near-term liquidity.
CRISIL will continue to monitor the timeliness of Asmitha’s debt repayment and the impact of the terms of the final restructuring under the CDR mechanism on the company’s credit risk profile.
About Asmitha Microfin
Set up in 2002 as a non-banking financial company (NBFC), Asmitha is a large microfinance institution (MFI) in India, in terms of loans outstanding. The company follows the micro-credit model of Grameen Bank, Bangladesh. In 2009-10 (refers to financial year, April 1 to March 31), the company made disbursals of Rs.22.5 billion. As on January 31, 2011, Asmitha’s assets under management (AUM) aggregated Rs.16.2 billion across 14 states (of which Andhra Pradesh and Orissa accounted for 51 percent and 17 percent respectively of loans outstanding).
For 2009-10, Asmitha reported a profit after tax (PAT) of Rs.588.0 million on a total income of Rs.2.8 billion, against a PAT of Rs.230.9 million on a total income of Rs.1.42 billion for 2008-09. For the nine months ended December 31, 2010, Asmitha reported a PAT of Rs.497.7 million on a total income of Rs.3.4 billion.