KOCHI: India Ratings has assigned Kosamattam Finance’s (KFL) additional non-convertible debentures (NCDs) and bank loans ‘Ind BBB’/Stable, while affirming the same ‘Ind BBB’ ratings to its existing Rs2392 crore (reduced from Rs2678.3 crore) NCDs and Rs800 crore bank loans.
The agency said that the ratings have factored in KFL’s extensive experience in the gold loan financing business, the stability of the gold asset class funded by KFL, increasing opportunities in the business, given the credit squeeze in the market, KFL’s stable asset quality, stable collections, moderately-improved profitability, improving operational performance and adequate liquidity.
Improved AUM
The ratings also factored in KFL’s improved asset under management (AUM) per branch and its significant presence in the gold finance business in the southern states.
The ratings, however, are constrained by KFL’s high regional concentration for assets and liabilities, lower capitalisation, which provides a lower buffer on tier 1 capital above the regulatory minimum, moderate funding diversification, the evolving systems, processes and record-keeping and the concentrated product portfolio.
Extensive experience
KFL has over a decade of experience in providing loans against gold jewellery, primarily in Kerala, Tamil Nadu and Karnataka. The company has also been ramping up its branch presence in Andhra Pradesh and Karnataka, with an additional 40 branches proposed in the financial year 2020-21 (FY21), which would take the total branch count to 979.
“Furthermore, the company has been expanding its portfolio in a difficult operating environment, with loan growth in the core gold finance business,’ the IndRa statement said.
The AUM grew by 17 per cent in FY20 (8 per cent in FY19). The gold loan book (97 per cent of AUM) grew by around 20 per cent to Rs2,645 crore in FY20 (12 per cent yoy in Q1, FY21).
The non-gold loan book mainly consists of mortgage loans (1.8 per cent), micro finance loans and other loans (about 1 per cent), which is a “defocused segment for the company. During Q1, FY21 and July 2020 combined, KFL’s disbursements amounted to around Rs2063.2 crore (21 per cent higher on a yoy basis) and it had collected around Rs2147 crore.
