Bibby Financial Services India Private Limited Instruments Amounts (Rs. crore) Rating action Long-Term Bank Loans Rs 75 crore* [ICRA]BBB- (SO) (stable) [assigned] Short Term Bank Loans Rs 75 crore [ICRA]A3 (SO) [assigned] *-interchangeable between long term and short term, subject to total utilization of Rs. 75 crore ICRA has assigned a rating of [ICRA]BBB- (SO) (pronounced as ICRA triple B minus Structured Obligation) with a stable outlook to the Rs. 75 crore1 long term bank loans and a rating of [ICRA]A3(pronounced as ICRA A three Structured obligation) to the Rs. 75 crore short term bank loans of Bibby Financial Services India Private Limited (BFSI) †. The rating takes into consideration the unconditional and irrevocable corporate guarantee extended by Bibby Financial Services Limited (BFSL), which ultimately has a 75% shareholding in the company as on March 31, 2012. BFSL has a long track record of operating in the factoring business in international markets and the group’s entry into the factoring business in India is part of its strategy to internationally diversify its operations ‡. BFSI enjoys benefits of capital and funding, domain expertise, management and systems from its parent. The parent has infused Rs. 49.59 crore of capital into the company and has in the past provided additional support by extending Standby Letters of Credit (SBLC’s) on some of the company’s banks lines. ICRA expects such support from the parent to remain forthcoming in the future. The rating of BFSI however is constrained by the company’s current small scale of operations and the high level of vulnerability of its existing portfolio, with a large proportion of exposures to weaker credit profiled borrowers with relatively large ticket sizes (although the same however have been declining from the past). The gross NPA% of the company stood at a very high level of 24.4% as on March 31, 2012, while its Net NPA/ net worth stood at 34.6%. Going forward ability of the company to substantially improve its asset quality, and demonstrate an ability to manage the inherent riskiness of the factoring business, competitive pressures and a challenging operating environment as it expands from its current small scale of operations (Funds in Use of Rs. 95.62 crore as on Mar-12) would be key rating sensitivities. At the same time ICRA has taken note of the improvement in the legal framework for factoring companies with the passing of the Factoring Regulation bill. The earnings profile of the company is currently is constrained by its high level of operating expenses (6.4% in FY-12) and high credit provisions (1.48% in FY-12). Going forward while an improvement in economies of scale would bring down operating expenses, the ability of the company to make recoveries on it existing pools of NPA’s and control fresh slippages would be a key future earnings determinant. As on March 31, 2012 the company had a leveraging level of 0.61 times and going forward the company intends to maintain the same at a moderate level of around 2 times over the medium term. Financial flexibility of the company currently is limited with sanctions limits from two banks; the liquidity profile however is supported by the inherent shorter contractual tenure of its advances (90-180 days) and un-utilized bank lines; as on Mar-12 the company had un-utilized bank lines amounting to ~Rs. 40 crore. About the Company Bibby Financial Services India Private Limited (BFSI) is headquartered in Gurgaon and was incorporated on January 5, 2007. The company is involved in the business of factoring of receivables. The company is a subsidiary of Bibby Group of Factors Limited UK (BGFLUK) (ultimately owned by Bibby Financial Services Limited) which has a 75% shareholding while the balance 25% of held by the company’s Managing Director Mr. Vikas Nanda. BGFLUK has contributed Rs. 49.59 crore of capital into the company; the same was originally infused in two tranches of Convertible Cumulative Preference Shares (CCPS) aggregating to Rs. 48.09 crore and the balance Rs. 1.5 crore as equity. The company had in March 2012 converted Rs. 26.87 crore of CCPS into equity (Rs. 0.15 crore as share capital and Rs. 26.72 crore as share premium). __________________________________________ 1100 lakh = 1 crore = 10 million †For complete rating scale and definitions please refer to ICRA’s website www.icra.in or other ICRA Rating Publications ‡The group currently operates out of 14 countries As on March 31, 2012 the total net worth of the company (including CCPS) stood at Rs. 57.79 crore and a total Fund in Use (FIU) of Rs. 95.62 crore. The company operates out of 4 locations- Gurgaon, Chennai, Kolkatta and Mumbai. For the financial year ended March 31, 2012 the company reported a Profit After Tax (PAT) of Rs. 2.77 crore on a total asset base of Rs. 97.81 crore against a PAT of Rs. 1.75 crore on an asset base of Rs. 90.43 crore in the previous financial year. As on March 31, 2012 the company had a gross NPA% of 24.4% and net NPA% of 21.7%. About Bibby Financial Services Limited (BFSL) BFSL is headquartered in Liverpool, United Kingdom and has been in existence since 1991. The group operates factoring companies from 46 locations in 14 countries: United Kingdom, Ireland, France, Germany, Czech Republic, Slovakia, Poland, Sweden, USA, Canada, Australia, India, Hong Kong, and New Zealand. The BFS Group in turn is owned by Bibby Line Group (BLG), which was founded in 1807 by John Bibby in Liverpool (UK) and its operations include - shipping, marine services, logistics, financial services, offshore services and retailing. BFSL’s consolidated revenues for the financial year ended December 31, 2012 was £ 154 million and profit after tax of £29 million. The group consolidated asset base as on December 31, 2012 was £ 590 million and had a net worth of £ 144 million. As on December 31, 2012 the leveraging level of the 2.86 times and groups return on net worth was 21.3%. August 2012 For further details please contact: Analyst Contacts: Ms. Vibha Batra, ICRA Gurgaon (Tel. No. +91-124-4545302) [email protected] Relationship Contacts: Mr. Jayanta Chatterjee (Tel. No. +91-80-43326401) [email protected] © Copyright, 2012, ICRA Limited. All Rights Reserved. Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. The ICRA ratings are subject to a process of surveillance which may lead to a revision in ratings. Please visit our website (www.icra.in) or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. 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