The firm has seen disbursement and collection efficiency improving to around pre-Covid level, according to CARE, which has assigned “AAA” rating to the debentures. The outlook is stable.
As of March 31, the company’s loan book was diversified with 31 per cent of the portfolio into mortgage-backed assets (SME, loan against property, etc.), while asset financing (which includes tractors, used and new CVs, CEs, gold loans) had a share of 43 per cent. The remaining 27 per cent of the portfolio comprised of personal and unsecured loans.
It reported moderation in asset quality owing to changes in regulations and weakening economic environment. Its gross non-performing assets (NPAs) rose from 1.83 per cent in March 2019 to 3.87 per cent in March 2020. Net NPAs also increased from 1.26 per cent in March 2019 to 3.19 per cent in March 2020.
Moreover, poor economic conditions and higher delinquencies across sectors contributed to additional slippages. In H1FY21, it reported a Gross and Net NPAs at 4.30 per cent and 3.10 per cent, respectively, as of September 30, 2020.
But, with economic growth showing improvement in the last few months, it is expected that the asset quality would not deteriorate significantly from current levels, the rating agency said.
The company has been maintaining comfortable capitalisation levels. Regular capital infusion by its parent HDFC Bank in the past and internal accruals have helped the firm maintain a comfortable capital adequacy ratio (CAR). Its reported CAR was 19.60 per cent with Tier-I CAR at 14.60 per cent as of September 30, 2020.
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