Brickwork assigns 'AA' rating to First Leasing`s NCD issue
Brickwork Ratings (BWR) has assigned a rating grade of BWR AA with Stable outlook for First Leasing Company of India Ltd‘s (FLCI) proposed Unsecured Subordinated Non-Convertible Debenture Issue of Rs 75 Cr. Instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations.
Brickwork Ratings (BWR) has assigned a rating grade of BWR AA with Stable outlook for First Leasing Company of India Ltd’s (FLCI) proposed Unsecured Subordinated Non-Convertible Debenture Issue of Rs 75 Cr. Instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations.
The rating has factored, inter alia, experience of the promoters and top management, healthy asset quality, 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, and increasing competition from banks and NBFCs.
BWR has essentially relied upon the unaudited 9MFY12 results, audited FY11 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 9MFY12 increased 5.8% y-o-y to Rs 28.6 Cr. FLCIs Net-worth increased 27% y-o-y to Rs 307 crores as of FY11. FLCI maintains good capital position with CAR of 19.25% and Tier 1 ratio of 19.01% as of as of 9MFY12. Overall gearing at 3.8 times as of 9MFY12 is comfortable. FLCI had a gross NPA ratio of 0.17% and net NPA ratio of 0.12% at 9MFY12.
In Dec. 2011, BWR had rated the Company’s proposed unsecured Subordinated NCD issue of Rs.75 crores and had assigned a rating of BWR AA. The company has not yet raised funds under the said issue. It now proposes to combine both the issues and intends to issue NCDs aggregating Rs 150 crores.
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