Brickwork gives 'AA' rating to First Leasing' debentures

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Brickwork gives 'AA' rating to First Leasing' debentures

Brickwork Ratings has come out with its report on First Leasing Company of India (FLCI). The rating agency has assigned a "BWR AA" rating for the company's proposed unsecured subordinate Non-Convertible Debenture Issue of Rs 75 crores.

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Brickwork Ratings has come out with its report on First Leasing Company of India (FLCI) . The rating agency has assigned a "BWR AA" rating for the company's proposed unsecured subordinate Non-Convertible Debenture Issue of Rs 75 crores.

The rating "BWR AA" stands for an instrument that is considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

The rating has factored, inter alia, experience of the promoters and top management, healthy asset quality, diversified funding profile and strong capital position supported by internal accruals.  The rating is constrained by the company's moderate scale of operations, high reliance on wholesale funding, volatile interest rate environment leading to pressure on margins and increasing competition from banks and NBFCs.

BWR has essentially relied upon the unaudited H1FY12 results, audited FY12 financials, projected financials, publicly available information and information and clarifications provided by the Company.

First Leasing Company of India Ltd (FLCI) incorporated in 1973, is a deposit taking NBFC and offers leasing services, Hire-purchase services and loans to corporates. The company is promoted by Mr. Farouk Irani and is the pioneer of leasing services in India. The company is headquartered in Chennai and has seven branches in Mumbai, Bangalore, Delhi, Pune, Coimbatore, Ahmedabad, and Trichy. The company has a professional management team headed by Mr. Irani, who is involved in the day to day operations of the company. Mr. Irani is an expert in leasing and has been instrumental in establishing the Association of Leasing and Financial Services Companies and has been the chairman of the association for the last 18 years.

FLCI's PAT increased 102.9% y-o-y to Rs 70.8 Cr for FY11, mainly on account of extraordinary gains of  Rs 42 Cr related to liquidation of investments. The company reported a 5.3% decline in Income from financing operations to Rs 174 Cr in FY11 from Rs 183 Cr in FY10, mainly on account of accounting changes related to expiry of pre-AS 19 lease assets under which total lease income was recorded as income. Post AS 19 only the interest component is recorded in the P&L as finance income. Adjusted for this impact Income from finance operations increased 7.6% y-o-y to Rs 174.1 Cr. Interest Expense increased 12.7% y-o-y to Rs 105.2 Cr for FY12. Net Interest Income was largely flat - up by 0.7% y-o-y to Rs 67.9 Cr for FY11.  Income from wind energy declined 29.8% y-o-y to Rs 2.7 Cr in FY11. Other Income increased to Rs 56.5 Cr in FY11 from Rs 3.1 Cr in FY10, on account of non-recurring income of Rs 53.42 Cr on sale of investment.  Operating Expense increased 14.3% y-o-y to Rs 22.6 Cr in FY11. The company set aside Rs 3.85 Cr as provision for standard assets in line with the new RBI guidelines. PAT for H1FY11 increased 15% y-o-y to Rs 20.8 Cr. FLCIs Net-worth increased 27% y-o-y to Rs 307 crores as of FY11. FLCI maintains good capital position with CAR of 19.38% as of FY11 up from 16.75% as of FY10. Overall gearing at 3.8 times as of FY11 is comfortable down from 4.4 times at FY10.

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To read the full report click on the attachment