Crisil upgrades Equitas and Ujjivan

Greater regulatory clarity, a stable operating environment, equity infusion and improved fund flow is working to the benefit of microfinance institutions (MFIs) outside Andhra Pradesh.

Rating agency CRISIL has upgraded the rating on Equitas Micro Finance and its subsidiary, Singhivi Investment & Finance from ‘BBB-/Positive’ to ‘BBB/Stable’.

It also upgraded the rating on Ujjivan Financial Services from ‘BBB-/Stable’ to ‘BBB/Stable’. The agency revised the outlook on Janalakshmi Financial Services to ‘Positive’, while reaffirming its rating at ‘CRISIL BB+’.

Fund flows to MFIs have improved, especially since the third quarter of 2011-12. Consequently, Equitas, Ujjivan, and Janalakshmi have raised funds aggregating Rs 1,300 crore from banks, non-convertible debentures, and securitisation, after a crisis hit MFIs in Andhra Pradesh in October 2010.

The MFIs raised equity capital of Rs 180 crore in 2011-12 and are expected to raise Rs 100 crore more over the medium term. Hence, the combined net worth of these MFIs may cross Rs 700 crore by March 2013, from Rs 390 crore as on December 31.

Consequently, their combined assets under management are expected to nearly double from December 2011 levels to Rs.30 billion by March 2013.”

The fund flows to the microfinance sector have improved in recent months due to greater regulatory clarity and stable operating environment. Lenders have shown preference for large and well-managed microfinance institutions (MFIs) operating outside Andhra Pradesh, CRISIL said. These MFIs have raised reasonable equity capital over the past few months, enhancing the confidence of lenders and stakeholders.

The large MFIs based outside Andhra are expected to resume their growth plans, albeit at a slower pace than before the Andhra crisis.

There profitability of MFIs is expected to improve moderately, driven by resumption of growth, economies of scale, and healthy asset quality, rating agency said.