CRISIL has downgraded its rating on the debt instrument and bank facilities of Asmitha Microfin Ltd (Asmitha) to ‘CRISIL D’ from ‘CRISIL C’.
Asmitha Crisil Ratings
The downgrade reflects delays by the company in servicing its debt. Asmitha, having been admitted to the corporate debt restructuring (CDR) mechanism, has delayed its debt repayment on the principal amount of its debt to preserve cash for disbursing loans outside Andhra Pradesh.
CRISIL had, earlier, removed its ratings on the debt instruments and bank facilities of Asmitha from ‘Rating Watch with Negative Implications’ and downgraded the rating to ‘CRISIL C’ from ‘CRISIL BB’ because of the increased probability of Asmitha defaulting on its debt, subsequent to its admission for restructuring of debt under the CDR mechanism in April 2011. CRISIL will continue to monitor the terms of the final restructuring under CDR, on the company’s credit risk profile.
Asmitha is also exposed to risks related to the challenging operating environment in Andhra Pradesh (AP) and to the constrained funding environment, especially for AP-based microfinance institutions (MFIs). Asmitha, however, benefits from its experienced management.
About Asmitha Microfinance
Set up in 2002 as a non-banking financial company, Asmitha is a MFI which offers microcredit to women. The company follows the microcredit model of Grameen Bank, Bangladesh. As on March 31, 2011, Asmitha’s loans outstanding aggregated Rs.12.6 billion (of which Andhra Pradesh accounted for more than 50 per cent of loans outstanding).
For 2010-11 (refers to financial year, April 1 to March 31), Asmitha reported a profit after tax (PAT) of Rs.209.7 million on a total income of Rs.4.4 billion, against a PAT of Rs.588.0 million on a total income of Rs.2.86 billion for 2009-10. For the quarter ended June 30 2011, Asmitha reported a net loss of Rs.528.6 million on a total income of Rs.613.4 million.