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Wonder Home Finance Limited December 31, 2020 Ratings Amount Facilities Ratings1 Rating Action (Rs. crore) Provisional CARE A- (CE) Placed on Credit 10.00 @ (Under Credit watch with Developing Implications) watch with (Reduced from 40.00) [Provisional Single A Minus (Credit Enhancement); Developing Under credit watch with developing implications] Implications CARE A- (CE) Placed on Credit 78.00 (Under Credit watch with Developing Implications) watch with Long Term bank (Enhanced from 50.00) [Single A Minus (Credit Enhancement)] (Under Developing facilities Credit watch with Developing Implications) Implications CARE A- (CE) (Under Credit watch with Developing Implications) 12.00 Assigned [Single A Minus (Credit Enhancement)] (Under Credit watch with Developing Implications) 150.00 CARE BBB+; Stable Reaffirmed (Enhanced from 10.00) [Triple B Plus; Outlook: Stable] 250.00 Total Facilities (Rupees Two Hundred and Fifty Crore only) @- The above rating is provisional and shall be confirmed once company furnishes evidence supporting execution of unconditional and irrevocable corporate guarantee by R. K. Marble Private Limited (RKMPL; rated CARE A- /CARE A2+; under credit watch with developing implications) and confirms the final repayment terms of the loan. Details of facilities in Annexure-1

Unsupported Rating 2 Withdrawn

Detailed Rationale & Key Rating Drivers For CE Rating: The rating assigned to the bank facilities of Wonder Home Finance Limited (WHFL) continue to be based on the credit enhancement in the form of unconditional and irrevocable corporate guarantee extended by RKMPL. Detailed rationale and description of the key rating drivers of corporate guarantee provider i.e., RKMPL is available on our website www.careratings.com.

For Standalone and Unsupported rating: The standalone credit profile of Wonder Home Finance Limited (WHFL) takes into account its improved operating performance and healthy collection efficiency despite Covid-19 outbreak, geographical expansion of operations to three states and expansion of resource base with sanctions from various banks and financial institutions. The rating continues to derive strength from resourceful promoters with common shareholding, logo and brand name with the flag-ship company of the group; Wonder Cement Ltd (rated CARE AA-; Stable/CARE A1+) and vast experience of WHFL’s key management personnel in retail finance business. Ratings continue to derive strength from establishment of wide branch network and retail-focused loan portfolio. The rating is, however, constrained on account of WHFL’s nascent stage of operations with lower seasoning of its loan portfolio, lack of experience of the Wonder Cement Group in housing finance business, moderate credit profile of target borrowers, regionally concentrated operations and stiff competition from established players.

Key Rating Sensitivities for standalone rating: Positive Factors:  Assets under Management (AUM) of above Rs.250 crore along with profitable operations while maintaining the asset quality at current levels. Negative Factors:  Any negative change in stance of promoters for providing financial support to WHFL

1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 2 As stipulated vide SEBI circular no SEBI/ HO/ MIRSD/ DOS3/ CIR/ P/ 2019/ 70 dated June 13, 2019 1 CARE Ratings Limited

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Detailed description of the key drivers of standalone ratings of WHFL Key Rating Strengths: Part of resourceful promoter group WHFL is a part of Wonder Cement group of Rajasthan run by the Patni family which comprises of two major companies viz. Wonder Cement Ltd. (WCL: Cement manufacturing company, rated CARE AA-; Stable/ CARE A1+) and R.K. Marble Pvt. Ltd. (RKMPL: marble mining & processing company, rated CARE A-; Stable / CARE A2+). The credit profile of WHFL derives significant financial flexibility from being a part of the group as manifested by the upfront as well as follow-up capital infusion amounting to Rs.150 crore from the promoters allowing the company to function through the initial years without any borrowed capital.

Long standing experience of the key management personnel in housing finance business coupled with induction of industry veterans to the Board enhancing its strength Mr. Ashok Patni, Chairman and founder of the Wonder Cement group has over three decades of experience in marble industry as well as over seven years’ experience in cement industry. However, housing finance being a new area of business, WHFL has appointed professionals having vast experience in the financial sector as its key management personnel. Mr. Sanjay Singh Rajawat has been appointed as Chief Executive Officer (CEO) of WHFL. He is a Chartered Accountant by qualification and has over two decades of experience in the banking sector whereby he has held key positions in various banks. Mr. Raunak Singh Mohnot, Chief Financial Officer (CFO) & Strategy Head of WHFL is a Chartered Accountant & Company Secretary. Likewise, most of the key positions in WHFL have been filled up with personnel having prior experience in their respective areas of work. Further, recently, WHFL inducted two new members as independent directors who are the veterans of the Industry leading to strengthening of the Board.

Upfront infusion of substantial equity capital by the promoters The promoters have already infused Rs.150 crore as equity capital including upfront seed capital of Rs.50 crore till H1FY19; another Rs.50 crore during H2FY19 and further infused Rs.50 crore during H1FY20 as committed earlier under the equity infusion schedule. Furthermore, WHFL is expected to receive need based support from the group as and when the same is required. The company has also shared its leverage strategy as per which the target/threshold gearing level for the infusion of fresh capital as indicated by the management is 2.50 times. Thus, given the promoters commitment, capital adequacy is likely to be maintained at comfortable level going forward.

Establishment of wide branch network in a short span of time WHFL received its registration certificate from National Housing Bank (NHB) in May 2018 and within a very short span of time (by end H1FY19) it had set up 26 branches in the state of Rajasthan. Each branch has been vested with required credit, legal, technical, sales, collection and admin personnel. Its existing branch network is expected to cover major part of the state. Further, recently, WHFL has expanded its operations to three states now viz. Rajasthan, Gujarat and Uttarakhand. The company has recently opened 5 branches in Gujarat and 2 branches in Uttarakhand taking the total number of branches to 35. Going forward, it has plans to expand its operations to one or more states every year would again require a lot of understanding about new geographies.

Detailed credit policy, operational manual and sourcing strategy put in place WHFL has prepared a detailed credit policy and operational manual, approved by its board of directors which helps to streamline the whole home loan process. The same is also being regularly updated by WHFL. The company has its own sales team and is not reliant on any intermediary or direct selling agent (DSA) for the sourcing of loans and generation of leads. WHFL generates majority of the leads through the referral model. WHFL has also put in place a very clear delegation of authority to take decisions based on ticket size. Credit norms are also reasonably conservative with maximum ticket size of Rs.35 lakh, no builder loans and defined limit of maximum Loan To Value (LTV) ratio as well as Fixed Obligation to Income Ratio (FOIR). WHFL has further tightened its credit norms post Covid to maintain its health asset quality on sustained basis.

Profitable operations along with expansion of the resource base The operations of WHFL started generating operating profits (pre provisioning and depreciation) from Q3FY20 and generated an operating profit of Rs.0.50 crore for H2FY20 and Rs.1.41 crore for H1FY21. This was even post accounting for some of the expenses of opening new branches. Further, WHFL had already taken a Covid-related provision of Rs.0.28 crore for Q4FY20 against the total outstanding deferred EMIs of Rs.0.83 crore as in August 2020 to be collected on account of the moratorium provided under the relief measures announced by RBI on March 27, 2020. WHFL has received sanction from multiple financial institutions with latest sanction has been received with a repayment terms of about 7 years which shall partly mitigate the ALM mismatches.

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Healthy collection efficiency despite the Covid-19 outbreak Despite the Covid-19 related stress, the collection efficiency for August 2020 was 95% while the same for September month onwards has been 100% barring 2-3 cases where the insurance claim is to be received post the death of the payer. Further, WHFL has not seen delinquency beyond 10 days in its portfolio since inception with the bounce ratio rate around 3% -4% ranges so far as articulated by management.

Liquidity: Adequate As on September 30; 2020, the free cash and cash equivalents balance was about Rs.8.18 crore as against the repayments of about Rs.5.84 crore for the next one year. Further, the company had undrawn sanctioned lines of Rs.60 crore as on above date of which about Rs.22 crore is in the nature of on-demand working capital lines thus plugging the ALM gap in the three to five year bucket as on the above date. For the longer run, the company is planning to avail the term debt with repayment terms of 7 years and above which would support their ALM.

Key Rating Weaknesses No prior experience of the group in housing finance business The Wonder Cement group has no prior experience in retail lending segment. Also, housing finance is an altogether different asset class compared to conventional financing which requires a deep understanding and experience in this domain. Accordingly, going forward, ability of the promoters to successfully establish their presence in housing finance business would be critical.

Early stage of operations with lower seasoning of loan portfolio WHFL received certificate of registration from NHB on May 29, 2018 to operate as a non-deposit accepting HFC. Due to initial stage of operations, the size of business is small. By Sept. 30, 2020, it has created a portfolio of ~Rs.176.49 crore which is small in size. Consequently, the seasoning of its loan portfolio is limited. As a result, its asset quality performance through different economic cycles and geographies is yet to be tested. However, portfolio quality has been maintained even as more than 2 years have passed and the portfolio has been resilient during Covid which provides some comfort. Sub-optimal credit profile of target borrowers Borrowers with good credit profile & credit history have easy access to banks w.r.to their housing finance requirement. Accordingly, the borrowers approaching small to mid-sized HFCs have relatively sub-optimal credit profile. Estimation of the income level of the borrowers in unorganized sector is challenging. At times, such borrowers have no credit history. Accordingly, ability of WHFL to assess the credit worthiness of such borrower class would be extremely critical for its success.

Regional concentration of operations WHFL has commenced its operations from Rajasthan and in first place its target is to stabilize itself in Rajasthan market. Group also has an established presence in Rajasthan market. During FY20, the operations of WHFL were restricted to the Rajasthan market only which results in regional concentration of its operations. However, recently, WHFL has expanded its operations to three states now with the aim of reducing the proportion of business generated from Rajasthan to 75% in FY21 from the earlier 100%. Going forward, the ability of WHFL to successfully expand its operations across geographies while maintaining its asset quality would be critical to its credit profile.

Stiff competition from established players There are many large sized established players in housing finance sector with large portfolio and diversified operations. WHFL has decided to currently restrict its operations within the state of Rajasthan whereby also it faces stiff competition from other established HFCs who have a better penetration in the market with their long standing presence.

Analytical approach for WHFL: Credit enhancement rating (CE): Guarantor RKMPL’s assessment since the bank facilities of WHFL are proposed to be entirely backed by unconditional and irrevocable corporate guarantee extended by RKMPL.

Unsupported rating: Standalone while factoring in linkages with the Wonder Cement Group.

Applicable Criteria Criteria for Rating Credit Enhanced Debt Criteria for Short Term Instruments Policy on Provisional Rating Financial Ratios - Non financial sector CARE’s methodology for Housing Finance companies Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings

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CARE’s Policy on Default Recognition Rating Methodology: Factoring Linkages in Ratings Financial Ratios – Financial Sector

About the Company- WHFL WHFL, incorporated on November 11, 2017 is a Jaipur (Rajasthan) based housing finance company (HFC) promoted by Mr. Ashok Patni and his family members. Mr. Ashok Patni and his family members / relatives held 100% equity stake in the company as on March 31, 2020. WHFL is a part of the Wonder Cement Group of Companies (promoted by the Patni family of Rajasthan), which also comprises of R.K. Marble Private Limited (RKMPL: marble mining & processing company) and Wonder Cement Limited (WCL: cement manufacturing company). WHFL received certificate of registration from National Housing Board (NHB) on May 29, 2018 to operate as a non-deposit accepting HFC. The company plans to venture into affordable housing loan segment for low-medium income section of the society. It will also provide non housing loans like Loan against Property (LAP) to individuals. Consequently, company will target low ticket size loans (min. Rs.5 lakh and max. Rs.35 lakh). WHFL is targeting customers of diverse income background such as salaried, self-employed professional (SEP) and Self- employed non-professional (SENP). At present the operations of the company are concentrated in Rajasthan, Gujarat and Uttarakhand with a total branch network of 35. The promoter group has infused a total equity capital of Rs.150 crore.

Brief Financials (Rs. crore) FY19 (A) FY20(A) Total operating income (TOI) 6.15 18.76 PAT (10.44) 0.16 Interest coverage (times) NM NM Total Assets 99.70 166.87 Net NPA (%) 0.00 0.00 ROTA (%) (16.74) 0.12 A: Audited; NM- Not Meaningful As per the provisional financials for H1FY21, WHFL reported TOI of Rs.12.52 crore and a net profit of Rs.0.55 crore.

About the guarantor-RKMPL R. K. Marble Private Ltd. (RKMPL), a part of the Wonder Cement Group, was established in 1989 by Kishangarh (Rajasthan)- based Patni family. Shri Ashok Patni, key promoter of RKMPL, has experience of over three decades in the marble industry. The company has marble mining facilities at Morwad and marble processing facilities at Kishangarh in Rajasthan. As on March 31, 2020 RKMPL has an installed capacity of 350,000 cubic meter of marble mining and 2,050,000 cubic feet of marble slabs processing per annum. Further, the group concerns also have marble mining facilities in Garda and Banswara in Rajasthan and in Vietnam through its subsidiaries.

Brief Consolidated Financials - (Rs. Crore) FY19 (A) FY20 (A) Total Operating Income (TOI) 311 295 PBILDT 76 54 PAT 34 19 Interest coverage (times) 10.58 4.53 Overall gearing (times) 0.57 1.14 A: Audited;

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

Covenants of rated facilities: Detailed explanation of covenants of the rated facilities is given in Annexure-3

Complexity level of various instruments rated for this company: Annexure-4

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Annexure-1: Details of Instruments/Facilities Size of the Name of the Date of Coupon Maturity Rating assigned along Issue Instrument Issuance Rate Date with Rating Outlook (Rs. crore) Provisional CARE A- (CE); March 2025 Term Loan-Long Term - - 10.00 credit watch with (Assumed) developing implications CARE A- (CE); credit watch Fund-based - LT-Term Loan - - August 2027 78.00 with developing implications CARE A- (CE); credit watch Fund Bases-LT- Cash Credit - - - 12.00 with developing implications December 2025 Term Loan- Long Term - - 150.00 CARE BBB+; Stable (Assumed)

Annexure-2: Rating History of last three years Current Ratings Rating history Date(s) & Date(s) & Name of the Type Date(s) & Date(s) & Sr. Amount Rating(s) Rating(s) Instrument/Bank Rating(s) Rating(s) No. Outstanding Rating assigned assigned Facilities assigned in assigned in (Rs. crore) in 2018- in 2017- 2020-2021 2019-2020 2019 2018 1)CARE 1)Withdrawn BBB; Fund-based - LT- 1. LT - - - (17-Sep-19) Stable - Term Loan (26-Nov- 18) 1)Provisional Provisional CARE A- (CE); CARE A- (CE) 1)Provisional Stable (Under Credit CARE A- (CE); Term Loan-Long (08-Dec-20) 2. LT 10.00 watch with Stable - - Term 2)Provisional Developing (09-Oct-19) CARE A- (CE); Implications) Stable

(15-May-20) Un Supported 1)CARE BBB+ 1)CARE BBB; Rating-Un (08-Dec-20) Stable 3. LT - - - - Supported Rating 2)CARE BBB (09-Oct-19) (Long Term) (15-May-20) 1)CARE A- (CE); CARE A- (CE) Stable (Under Credit Fund-based - LT- (08-Dec-20) 4. LT 78.00 watch with - - - Term Loan 2)CARE A- (CE); Developing Stable Implications) (15-May-20) 1)CARE BBB+; Term Loan-Long CARE BBB+; 5. LT 150.00 Stable - - - Term Stable (08-Dec-20) CARE A- (CE) (Under Credit Fund-based - LT- 6. LT 12.00 watch with - - - - Cash Credit Developing Implications)

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Annexure-3: Detailed explanation of the terms of rated facilities- Not Applicable

Annexure-4: Complexity Level of various facilities rated for this company Sr. No. Name of the Instrument Complexity Level 1. Term Loan-Long Term Simple 2. Fund-based - LT-Term Loan Simple 3. Fund Bases-LT- Cash Credit Simple 4. Term Loan- Long Term Simple

Annexure-5: List of subsidiaries and joint ventures of RKMPL getting consolidated Sr. No. Name of the Entity % of shareholding by RKMPL 1 R. K. Marble Vietnam Company Limited 100.00 2 R. K. Marble International Company Limited* 30.00 *70% of the stake in R. K. Marble International Company Limited is held by R. K. Marble Vietnam Company Limited

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

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About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

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