Growth prospects improve for MFIs outside AP: Crisil

Written by fe Bureau | Mumbai | Updated: Feb 29 2012, 09:08am hrs
Funding and growth prospects have improved for micro-finance institutions (MFIs) based out of Andhra Pradesh, according to a report by Crisil. The rating agency attributed this to greater regulatory clarity and stable operating environment. It also upgraded the ratings of two large MFIs and revised the outlook to positive for another.

These MFIs operating outside Andhra have raised reasonable equity capital over the past few months, thereby, enhancing the confidence of lenders and stakeholders, the report said.

Crisil expects large MFIs based outside AP to resume their growth plans, albeit at a slower pace than before the crisis hit the state. It also expects the profitability of these MFIs to improve moderately, driven by resumption of growth, economies of scale, and healthy asset quality. Taking note of these developments, it has upgraded its rating of Equitas Micro Finance and its wholly owned subsidiary, Singhivi Investment & Finance, to Crisil BBB/Stable from Crisil BBB-/Positive.

It has also upgraded its rating on Ujjivan Financial Services to Crisil BBB/Stable from Crisil BBB-/Stable, and revised its outlook on Janalakshmi Financial Services to Positive, while reaffirming its rating at Crisil BB+.

Fund flows to large MFIs based outside Andhra Pradesh have improved in the recent months, especially since the third quarter of 2011-12. Consequently, Equitas, Ujjivan, and Janalakshmi have raised funds aggregating R1,300 crore through diversified sources (banks, non-convertible debentures, and securitisation) post the Andhra crisis in October 2010, said the report.

In addition, these MFIs raised equity capital of R180 crore in 2011-12 and are expected to raise capital of around R100 crore over the medium term. As a result, the combined net worth of these MFIs is expected to exceed R700 crore by March 2013, the report said. Ramraj Pai, director, Crisil, said: With increasing investor and lender confidence, we believe entities such as Equitas, Ujjivan, and Janalakshmi are well positioned to meet their revised business plans. Consequently, their combined assets under management are expected to nearly double from December 2011 levels to R3,000 crore by March 2013.