CARE assigns AA; Stable rating on Tier-II Bonds of AU Small Finance Bank

24 Mar 2022 , 09:30 AM

CARE Ratings has assigned a rating of CARE AA; Stable to the long-term debt instruments (Tier-II Bonds) Rs200 crore of AU Small Finance Bank. The earlier rating on long-term debt instruments of the Bank was CARE AA-/Stable. The rating on short-term instruments (Certificate of Deposits) Rs500 crore of the Bank has been reaffirmed at CARE Al+.

At around 9.35 AM, AU Small Finance Bank Ltd was trading at Rs1,245.05 per piece up by Rs9.15 or 0.74% from its previous closing of Rs1,235.90 per piece on the BSE.

“The ratings assigned to the debt instruments of AU Small Finance Bank Limited (AUSFB) factor in the continued momentum of growth in business and size, post-conversion into a small finance bank (SFB) in April 2017, the establishment of deposit franchise along with a sizeable Current Account Savings Account (CASA) deposits, and a moderately-diversified advances portfolio with a largely secured lending portfolio,” Bank shared CARE Ratings rationale.

It added, the ratings also factor in the experience of the management team, comfortable capitalisation levels supported with periodic equity capital raise, improvement in asset quality parameters in the current year after being impacted due to COVID-19-related stress, and healthy profitability.

The ratings are, however, constrained by moderate seasoning in AUSFB’s new asset verticals, including business banking, home loans, and two-wheeler financing, the regional concentration of advances and deposits as well as the relatively moderate size as compared to mid-sized private sector banks.

CARE Ratings has also withdrawn the ratings assigned to the bank facilities of AUSFB with immediate effect, as the company has repaid the aforementioned term loan in full and there is no amount outstanding under the loan, as on date.