author

Author: Don Obrien

S&P upgrades Manappuram Finance’s long term rating from ‘B+’ to ‘BB-“https://www.business-standard.com/” Business Standard News



Standard and Poor’s (S&P) has upgraded Ltd’s long term issuer rating from “B+” to “BB-” on the expectation that it will continue to perform better than its NBFC peers over the next 12 months.

The outlook is stable. The global Rating agency also affirmed the ‘B’ short-term issuer credit rating on the India-based finance company.

This expectation of better performance would be reflected in the company’s lower credit costs, above-average profitability, and strong capitalisation.

The rating agency in a statement said that Manappuram’s gold-based lending model with a three-month tenor allows it to recognise asset quality stress early. Gold prices had fallen significantly till April 2021, from a peak in August 2020.

The decline in gold prices led to increased auctions of higher loan-to-value (LTV) loans in Q1FY22.

The company’s gold auctions are likely to gradually return to their normal levels as economic conditions improve. Elevated auctions have in part lowered Manappuram’s average LTV ratio to about 65% as of June 30, 2021, from about 71% as of end-March 2021. This, provided the company some buffer to absorb price fluctuations.

Stress will likely remain high in Manappuram’s non-gold portfolio, especially in the micro finance business. The asset quality of the non-gold loan portfolio has deteriorated sharply over the past two years. However, billing and collection efficiency are returning to pre-Covid-19 levels, hinting at improving asset quality trends.

The agency said it expected Manappuram’s risk-adjusted capital ratio to stay above 30% over the next 12 months. The company’s core earnings are likely to remain at more than 5% of its average managed assets during this period. This ratio is one of the highest among its rated peers.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor





Source link

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Oliver Bolt

Oliver Bolt

On Key

Related Posts