DRAFT RATING RATIONALE
Gnana Shale Souharda Co-operative Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.14.09 Crs. of Gnana Shale Souharda Co-operative Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Term Loan
Sanctioned
Working Capital Term Loan Sanctioned Working Capital Term Loan Sanctioned Working Capital Term Loan Sanctioned Working Capital Term Loan Proposed Over Draft Sanctioned |
05.00
01.40 00.63 02.00 01.84 02.25 |
Long Term | BWR BB - (Stable) |
| Working Capital Term Loan Sanctioned | 00.97 | Short Term | BWR A4 |
| Sub Total | 14.09 | ||
| Grand Total | 14.09 | (Rupees Fourteen Crores and Nine lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
The ratings takes into account qualified and experienced management of the company and established track record of the cooperative, growing membership base and strong growth in AUM, improved earnings and adequate liquidity. The rating, however, is constrained by small scale of operations, regional concentration of its operations, moderate financial risk profile and challenging environment for NBFIs.
BWR believes that Gnana Shale Souharda Co-operative Ltd business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERS
BWR has essentially relied upon the audited financial statements of FY19, FY20, FY21, provisional financials of FY22 and projected financial statements of FY23 & FY24 of Gnana Shale Souharda Co-operative Ltd, publicly available information and information / clarifications provided by the society’s management.
Credit Strengths:
-
Management experience and established track record of the cooperative :
The cooperative was registered on 27.12.2010 with its area of operation across state of Karnataka under Souharda Societies Cooperative Act. The cooperative has record of over a decade in industry with extensive management experience. The cooperative is headed by Mr. Shridhar N Rao( President) who has 10 years of experience.
-
Growing membership base and strong growth in AUM :
The numbers of members of the cooperative has been increasing with membership increasing from 6349 members in FY20 to 8661 members in FY21 and further to 10821 members in 10MFY22. The cooperative has been showing consistent growth in Asset Under Management (AUM) on y-o-y basis to Rs. 121.19 crore as on FY21(FY20: Rs. 108.77 crore and FY19: Rs. 78.03 crore).
-
Improved earnings and adequate liquidity :
With increased membership base in FY21 and increase in AUM during FY21, the total income improved to Rs. 14.84 crore in FY21 from Rs. 12.62 crore in FY20 and Net profits to Rs. 0.84 crore in FY21 from Rs. 0.75 crore in FY20. The gearing is 1.73 times as on 31 March 2021( 2.12 times as on 31 March 2020). The liquidity is adequate with cash and bank balance of Rs. 0.48 crore and current investments of Rs. 22.22 crore as on 31 March 2021.
-
Small scale of operations :
The cooperative's scale of operations has remained low with total income of Rs. 14.84 crore in FY21 and tangible net worth of Rs. 4.39 crore as on 31 March 2021. On a provisional basis, the cooperative has achieved operating income of Rs. 15.25 cr in FY22. The income is mainly from income from investments( FDs and SB) and interest on loan given to the members.
-
Regional concentration of its operations :
The operations of the cooperative is limited to state of Karnataka. The registered office is in Bengaluru with 11 branches across Karnataka. There are number of villages attached to cooperative in state of Karnataka.
-
Moderate financial risk profile :
The gearing ratio remained moderate, though marginally improved from 2.12 times as on 31 March 2020 to 1.73 times as on 31 March 2021. The debt protection metrics are also moderate with ISCR and DSCR at 1.10 times and 1.02 times as on 31 March 2021.
-
Challenging operating environment for NBFIs :
The cooperative operates in a highly competitive industry. The cooperative remains exposed to inherent risks in micro lending including sensitivity to prompt recovery/collections of loans, state intervention and policies and regulatory risks.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
The cooperative's ability to scale up its operations while maintaining asset quality, efficiently manage its working capital requirements and strengthen its liquidity and overall credit profile would be key rating sensitivities.
Positive:
- Improvement in membership and loan portfolio, maintaining asset quality , improvement in operating income with considerable improvement in profitability, debt protection metrics, capital and liquidity on a sustained basis.
Negative:
- The rating may be downgraded if there is sharp deterioration in asset quality, decline in operating income thus affecting the profitability margins or deterioration in its financial risk profile from current level.
The liquidity of the cooperative is adequate marked by average working capital utilization of around 70% for the last 12 months. The cooperative has cash and cash equivalents of Rs. 0.48 crore as on 31 March 2021 and Rs. 0.48 cr as on 31 March 2022. The cooperative had current investments of Rs. 22.22 crore as on 31 March 2021 and Rs. 25.13 crores as on 31 March 2022. The cooperative with continued collections, available cash and bank balance and undrawn bank lines will have adequate funds to meet its debt/ interest obligations for near term.
PROFILEThe Gnana shale Souharda Cooperative Limited , was registered on 27 December 2010 with its area of operation across the state of Karnataka under Souharda Societies Cooperatives Act. Societies registered. Societies registered under Karnataka Souharda Sahakari Act, 1997 are functioning like any other cooperative institutions , on the internationally accepted Cooperative Principles. The Gnanashale Souharda Cooperative Limited has started functioning in year 2011. The society is having registered office in Bengaluru with 11 branches- three in Bengaluru, one each at Chamrajnagar, Dharwad, Vijayapura, Belagavi, Devanahalli, Hubli, Holehonnur & Bagalur. The society is undertaking credit activities, promoting self help groups for women empowerment, etc. The society is also extending e-stamping service as agent to Registration Department of State, etc.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 14.84 | 12.62 |
| EBITDA | Rs.Crs. | 12.31 | 10.53 |
| PAT | Rs.Crs. | 0.84 | 0.75 |
| Tangible Net Worth | Rs.Crs. | 4.39 | 3.47 |
| Total Debt/Tangible Net Worth | Times | 1.73 | 2.12 |
| Current Ratio | Times | 19.06 | 20.22 |
The terms of sanction include standard covenants normally stipulated for such facilities.
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - SanctionedWorking Capital Term Loan - SanctionedWorking Capital Term Loan - SanctionedWorking Capital Term Loan - SanctionedWorking Capital Term Loan - ProposedOver Draft - Sanctioned | Long Term | 05.0001.4000.6302.0001.8402.25 | BWR BB-(Stable) | NA | NA | NA | |||
| 2 | Working Capital Term Loan - Sanctioned | Short Term | 00.97 | BWR A4 | NA | NA | NA | |||
| Total | 14.09 | (Rupees Fourteen Crores and Nine lakhs Only) | ||||||||
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
For More Information Contact:| Analytical Contacts | |
|---|---|
|
Roshan Ranjan Lead Analyst roshan.r@brickworkratings.com |
Nagaraj K Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|---|
| 1 | ICICI Bank | Over DraftSanctioned | 2.25 | _ | 2.25 |
| 2 | National Cooperative Development Corporation | Working Capital Term LoanSanctioned | 1.40 | _ | 1.40 |
| 3 | National Cooperative Development Corporation | Working Capital Term LoanSanctioned | 0.63 | _ | 0.63 |
| 4 | National Cooperative Development Corporation | Working Capital Term LoanSanctioned | 2.00 | _ | 2.00 |
| 5 | National Cooperative Development Corporation | Working Capital Term LoanSanctioned | _ | 0.97 | 0.97 |
| 6 | National Cooperative Development Corporation | Working Capital Term LoanProposed | 1.84 | _ | 1.84 |
| 7 | Samunnati Financial Intermediation & Services Private Limited | Term LoanSanctioned | 5.00 | _ | 5.00 |
| Total | 13.12 | 0.97 | 14.09 | ||
| TOTAL (Rupees Fourteen Crores and Nine lakhs Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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