“The reaffirmation of the ratings for long term bank facilities and Non-Convertible Debentures (NCDs) of Capital Trust Limited (CTL) continues to derive comfort from the long-standing experience of promoters, low gearing, moderate liquidity profile adequate underwriting systems and processes under new mode lending under the digital base and moderate geographic diversification,” company shared CARE’s rating rationale.
CARE also takes note of company’s view towards building a suitable/sustainable Business Correspondent (BC) partner for lending institutions and maintaining sustainable on-book portfolio with moderate gearing levels going forward.
However, the ratings continue to be constrained by protracted decline in consolidated Assets Under Management (AUM), decline in profits with company reporting net losses for FY21 and impending asset quality issues. The decline in AUM was driven by strategic shift from cash-based collection system to digital transactions.
The company has shifted its strategic focus to incrementally disbursing shorter tenured, higher yield loans only under digital mode of transactions however currently this portfolio has limited seasoning and performance of the same is yet to be seen over a longer period. The ratings continue to take into consideration the inherent risk involved in the industry including unsecured lending, marginal profile of borrowers, socio-political intervention and regulatory risk.
Going forward, the ability of the company to improve its collections especially recovery from borrowers in overdue buckets and written-off portfolio during the stressful scenario of Covid-19, attain sustainable growth in its portfolio, maintain sufficient liquidity and improving its profitability and asset quality would be the key rating sensitivities.
At around 10.16 am, Capital Trust Ltd was trading at Rs94.20 per piece up by Rs1.25 or 1.34% from its previous closing of Rs92.95 per piece on the BSE.