CARE Ratings has upgraded the long-term rating of Poonawalla Fincorp Ltdand its subsidiary Poonawalla Housing Finance Ltd to ‘AAA’ (Outlook: Stable) from ‘AA+’ (Stable).
The rating is applicable for the non-bank company’s bank loan facilities, non-convertible debentures, market-linked debentures and subordinated debt.
Citing a successful takeover by the Poonawalla Group, CARE said the strong association with the Cyrus Poonawalla Group, enabled Poonawalla Fincorp to raise incremental funds at competitive rates in the debt market reflecting the market perception of the strong group support.
The change in name from ‘Magma’ to ‘Poonawalla’ -the family name of the promoters- also creates a strong moral obligation to support Poonawalla Fincorp, it added.
“The rating upgrade reaffirms the strength of the organization and its leadership along with the financial and operational excellence. This is an important milestone in our journey towards becoming a leader in financial services and is a testimony of our commitment towards building a strong institution,” Chairman Adar Poonawalla was quoted as saying in a release.
The rating agency said the company benefitted from stability in the senior management team, a revised product strategy that targets better quality retail consumers and small businesses, and lower dependency on cash collection.
The NBFC also downsized low value-added businesses, improved the overall resource base with borrowings at competitive rates, improved the asset quality and provisioning to cover any major shocks, and showed a sequential improvement in profitability.
“The ratings also factor in significant infusion of equity capital of ₹3,456 crore in May 2021, resulting in comfortable capital adequacy ratio and low leverage. The ability of the company to profitably scale up the business with new product lines remains a monitorable,” CARE said.