Rationale

 ICRA has withdrawn the rating assigned to the Rs. 130.00-crore non-convertible debenture (NCD) programme and the Rs. 28.00-crore subordinated debt programme of Satin Creditcare Network Limited (SCNL) as no amount is outstanding against the rated instrument. The rating was withdrawn at the request of the company and as per ICRA's policy on the withdrawal and suspension of credit ratings. The ratings reaffirmation factors in SCNL's established presence in the Indian microfinance landscape as it is one of the largest players in the sector as per portfolio size. The ratings also factor in the company's diversified funding profile and strong liquidity position. Though the inflows from advances have been adversely impacted on account of the Covid-19 pandemic, the company has consistently maintained high on-balance sheet liquidity (Rs. 1,469-crore unencumbered liquid balance as on March 31, 2021) and has been able to garner funding support from lenders. Supported by a good information system, monitoring process and information technology (IT) capabilities, SCNL has been providing its customers with a wide range of online repayment options while maintaining customer connect. This supported its collection and recovery efforts during the pandemic and led to operational efficiency. However, given the challenges faced by the microfinance industry on account of the disruptions caused by the pandemic, SCNL witnessed a deterioration in its asset quality in FY2021. Consequently, increased provisioning requirement and write-offs are expected to have supressed the profitability metrics in FY2021. The asset quality may get further impacted with the recent increase in Covid-19 infections and localised restrictions/lockdowns and remains a key monitorable. The ratings are further constrained by the unsecured nature of SCNL's portfolio and the marginal borrower profile and the vulnerability to income shocks resulting in high volatility in the asset quality. In addition, the share of the portfolio in the top 3 states, though improved, remained high at 49% as on December 31, 2020. ICRA expects that the expansion of footprint while scaling up will further derisk the book geographically. The ratings are also constrained by the company's requirement to support its growing subsidiaries. SCNL's ability to match the capital requirements of its subsidiaries by raising fresh capital and maintaining adequate capital levels for its standalone as well as consolidated operations will remain a key monitorable as the subsidiaries scale up. Moreover, SCNL's ability to navigate through the adversity and manage the impact of the pandemic on business growth, client retention and asset quality would remain critical from a rating perspective, going forward.