Overview:
- “A” rating with a positive outlook from CARE and a stable outlook from ICRA.
- Lending predominantly to Mid-Large Corporates with an average ticket size of 3.5 Crores.
- Low Debt/Equity ratio of 2.76.
- Gross Non-Performing assets near 0.5%.
- Capital Adequacy ratio of 25% Return on Equity almost 9%.
- High competition in the NBFC sector and no strong parental backing.
Details for Vivriti Capital’s new Issue
Issue opens on 18th August 2023 and closes on 31st august 2023
These NCDs are secured and will be listed on the exchanges to provide liquidity
The face value is Rs. 1000
| Series | I | II | III | IV | V |
|---|---|---|---|---|---|
| Frequency of Interest payment | Monthly | Annual | Quarterly | Monthly | Annual |
| Duration (In Months) | 18 | 18 | 24 | 24 | 24 |
| Coupon rate | 9.57% | 10% | 9.65% | 10.03% | 10.50% |
| Yield to Maturity (YTM) | 9.98% | 10.06% | 9.98% | 10.49% | 10.48% |
| Principal repayment | On Maturity | On Maturity | Rs 125 per Quarter | On Maturity | On Maturity |
| Face Value | 1000 | 1000 | 1000 | 1000 | 1000 |
Detailed Analysis:
Vivriti Capital’s Capital Adequacy ratio exceeds 25%, considerably higher than the required mandate of 15% by the RBI highlighting its robust capital position. This ratio, calculated as the proportion of Equity Capital to Risk Weighted Assets, showcasing the company’s ability to absorb unexpected losses.
Diving into the specifics of its operations, Vivriti Capital focuses lending with an average tenor of two years, with interest rates ranging around 14% (+/- 2%). In terms of borrowing, Vivriti Capital maintains an average borrowing rate of 9.98%-10.49% over a two-year tenor. This approach emphasizes stability and minimizes potential risks associated with Asset Liability Mismatch (ALM).
A key risk mitigation strategy employed by Vivriti Capital is its preference for secured lending, often involving pledging shares, asset hypothecation, or utilizing escrow accounts. This approach shields the company from excessive credit risk, contributing to its capability to maintain a lower GNPA over the long term.
When considering asset quality, Vivriti Capital upholds an impressively low level of Gross Non-Performing Assets (GNPA), standing at around 0.5%. This can be further analysed using a lagging denominator, which takes into account the previous year’s book value/AUM to offset the impact of the 53% growth in book size.
Despite low interest rate risk due to average period of lending being two years, Vivriti Capital strategically manages this risk by keeping 60% of its loan book at floating interest rates.
Prudence is advised in light of intense competition within the NBFC sector, coupled with Vivriti Capital’s absence of parental support.
Additionally, the matter of a modest credit rating should also be considered.
Conclusion
In our opinion, after detailed analysis we suggest that vivriti capital should be a small part of a well-diversified debt portfolio, thus increasing overall returns while maintaining risk.
Disclaimer:
"Investment in debt instruments carry inherent risks, these are our opinions and we
advise prudence while taking any investment decision"