CREDIT INSIGHT
August 4, 2021
Monthly Credit Update
Fixed Income: Investment Process
“Credit Tracker” list of approved Credits: LT & ST: Bottom Up Approach
Inclusion and sustainability of a credit in the record/list is determined by the established credit process, which includes two broad areas :
• Approval for new credits (through credit note)• Review and monitoring of existing credits
“Early in- Early Exit” Identify new promising credits early on, take shorter exposures
Access to in house Equity Team expertise on sector/stock coverage where we take exposure
Board approved Internal Credit Risk Assessment Policy
Highlights of the Credit Research Process
• Monthly Asset Allocation Matrix
• Benchmark & Peer Group Analysis
• Daily Performance Attribution
• Portfolio Laddering• Rates: Access to best ofInternal/External & Proprietary
• Credit: Exhaustive top down process combined with "bottom up" issuer selection
• Limit monitoring/ compliance
• Monthly Review of Risk Areas
• Global Supervision of Risk Processes
ResearchRisk
Management
Fund Management
KEY CREDIT NOTES
Ultratech Cement Ltd Reliance
Industries Ltd
Housing Development
Finance Corporation Ltd
LIC Housing Finance Ltd
Cholamandalam Investment & Finance Ltd
Larsen And Toubro Limited
Grasim Industries Limited
Mar-2021Parameter (`Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
ULTRATECH CEMENT LTD
Rating: Rating change in last month:Sector:
About:
CRISIL AAA (stable)/A1+ , India Ratings ltd AAA(stable),A1+ No change
CEMENT & CEMENT PRODUCTS
Ultratech Cement ltd (‘UCL’) is India’s largest manufacturer of grey cement, ready mix concrete and white cement in India. It has 12 integrated plants, one clinker plant, 20 grinding units, seven bulk terminals, and two white cement and putty plants. Its operations span across India, the UAE, Bahrain, Bangladesh and Sri Lanka. UCL has a market share of 24% in India with 113.35 million tonne per annum (mtpa) capacity. Operating efficiency is superior, driven by strong consumption norms, efficient logistics (because of pan-India presence), and captive power capability. During fiscal 2021, UCL, , had a net profit of Rs 5462 cr with operating income of Rs 44726 crore, against a net profit of Rs 5810 crore with operating income of Rs 41476 crore in fiscal 2020. Adjusted debt/EBITDA was down to 0.5 in Mar'21 from 0.8x in Mar'20
Net Sales
Operating Income
OPBDIT
PAT
Net Cash Accruals
Equity Share Capital
Adjusted Networth
Adjusted Debt
OPBDIT Margin (%)
Net Profit Margin (%)
ROCE (%)
PBDIT / Interest & Finance Charges (x)
Net Cash Accruals / Adjusted Debt (x)
Adjusted Debt / Adjusted Networth (x)
Adjusted Debt / PBDIT (x)
Current Ratio (x)
Total Outside Liabilities / Adjusted Networth (x)
Cash Flow from Operations
Operating Income / Gross Block (x)
Gross Current Asset Days
Debtors Days
Inventory Days
Creditors Days
44,726 41,476 36,775 30,595 25,092
44,726 42,026 37,303 31,003 25,326
11,568 9,268 6,784 6,153 5,176
5,462 5,810 2,432 2,224 2,714
8,162 8,095 4,185 3,701 3,712
289 289 275 275 275
32,383 27,243 20,866 22,319 22,929
17,784 22,898 22,818 19,480 8,474
25.9 22.1 18.2 19.8 20.4
12.2 13.8 6.5 7.2 10.7
15.5 13.3 10.7 11.5 11.9
8.3 5.0 4.7 5.2 8.6
0.5 0.4 0.2 0.2 0.4
0.5 0.8 1.1 0.9 0.4
1.4 2.3 3.2 3.1 1.4
1.2 0.9 0.9 1.0 1.6
1.3 1.5 1.7 1.4 0.8
_ 6,906 4,212 3,990 4,009
_ 0.9 0.9 0.9 1.0
196 79 85 82 78
21 20 25 26 23
44 46 43 48 43
242 130 104 106 99
Source: CRISIL Research. Financials are displayed as per the standard adjustments done by CRISIL.Note: No Reported Financials Available
RELIANCE INDUSTRIES LTD
Rating:
Rating change in last month:Sector: About:
CRISIL AAA (stable)/A1+, ICRA AAA (stable)/A1+, India Ratings AAA (stable)/A1+, CARE AAA (stable)/A1+
No changeENERGYReliance Industries Limited (RIL) is one of India's largest private sector companies (maket cap > 14lakh crores as on 31st Jul 2020), with diverse interests, including petrochemicals, oil refining, and upstream oil and gas E and P.. In the recent past, RIL has diversified into newer businesses which includes organized retail and digital services. RIL operates one of the most complex refineries globally which improves its flexibility in terms of crude sourcing resulting in relatively high Gross Refining Margins (GRMs). RIL’s strength in the petrochemicals business has also grown following large-scale capacity expansions, including the refinery off-gas cracker, in the previous fiscal and healthy ramp up of operations. The company’s digital services venture, where it has made sizeable investments, has been gaining subscribers at a healthy pace since inception. RIL has recently raised a record amount of equity capital from marquee investors globally which shows the immense strength in its newer businesses which includes telecom, retail and digital services.
Net Sales
Operating Income
Operating Margin (%)
Profit After Tax
Net Profit Margin (%)
Net Worth
Total Debt
Debt-Equity ratio (x)
245,667 334,933 369,988 289,283 240,363
245,667 334,933 369,988 289,283 240,363
13.6 15.6 15.8 18.0 18.1
31,944 30,903 35,163 33,612 31,425
13.0 9.2 9.5 11.6 13.1
447,672 403,633 390,627 298,660 266,159
193,750 262,345 161,720 122,946 114,970
0.4 0.7 0.4 0.4 0.4
Mar-2021Parameter (`Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
HOUSING DEVELOPMENT FINANCE CORPORATION LTD
Rating: Rating change in last month:Sector:
About:
CRISIL AAA (stable)/A1+ , ICRA AAA (stable)/A1+, CARE AAA (stable)/A1+ No change
FINANCIAL SERVICES
Housing Development Finance Corporation Limited (HDFC), India’s premier housing finance entity, is in existence for over 40 years. With a presence in banking, insurance and asset management, the HDFC Group is an important part of the Indian financial services sector. HDFC’s has a strong franchise and has demonstrated ability to grow in the competitive mortgage finance market, its focus on prime salaried customers within the home loan segment and its good asset quality indicators over credit cycles. HDFC has a strong capitalization, moderate gearing and good profitability indicators. During FY2020, HDFC reported an asset base of Rs. 5,16,800 compared to an asset base of Rs. 4,58,776 crore in FY2019. HDFC reported Profit After Tax (PAT) of Rs. 17,769 crore during the year ended March 31, 2020 compared to Rs. 9,632 crore during the year ended March 31, 2019.
For FY21, core PBT / core operating profit grew a healthy 15%/17% YoY to INR126b/INR146b, despite an additional ESOP charge of INR3.4b. Strong disbursement growth (on a low base) of 60% YoY, stable QoQ spreads at 2.3%, GNPA at 1.98%, and a reduction of 74bp QoQ in stage 2 assets were the key positives for the quarter. In Mar’21, for the Individual Lending business, collection efficiency (CE) stood at 98.0% on an overall basis (97.6% in Dec’20) – similar to pre-COVID levels.
LIC HOUSING FINANCE LTD
Rating: CRISIL AAA (stable)/A1+ , ICRA A1+, CARE AAA (stable)Rating change in last month: No changeSector: FINANCIAL SERVICES
About: LIC is the single-largest shareholder in LIC Housing with a stake of 40.31% as on Mar 30, 2020. It is India's second-largest housing finance company, with 9 regional offices, 23 back offices, and 273 marketing units in India, and 2 overseas representative offices (1 each in Dubai and Kuwait), as on March 31, 2020. LIC Housing benefits from LIC's strong brand equity, access to its agency network for origination of loans, and funding support. LICHF recently announced further support from its parent LIC which is likely to increase equity stake in the company. Preferential allotment of 45.4m shares to LIC will increase the promoter stake to 48.5% from 40.3% currently. This will mitigate leverage risk hovering over the company for the past several years. For FY 21, NII was 5244cr vs 4821cr and PAT was Rs 2734cr vs 2401cr in FY20
Mar-2021Parameter (` Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
Equity Share Capital
Reported Networth
AUM
Total assets
Total borrowing
Interest Income
Interest expenses
Operating expenses (incl. depreciation)
Total income
PAT
Gross NPA
Net NPA
Overall CAR
361 346 344 335 318
108,783 86,158 77,355 65,265 39,817
488,006 442,262 402,257 358,721 296,388
569,046 525,341 458,770 398,905 336,354
441,365 419,102 365,266 319,716 279,732
42,812 42,683 38,194 32,542 30,378
28,686 31,076 27,897 23,544 20,934
_ _ _ _ _
47,208 49,636 42,827 40,598 33,662
12,027 17,770 9,632 10,959 6,869
2.38 2 1.18 1.12 0.8
1.15 1.49 0.84 0.8 0.54
22.17 17.59 19.08 19.16 15.79
Mar-2020Parameter (` Crore) Mar-2017Mar-2018Mar-2019 Mar-2016
Equity Share Capital
Reported Networth
AUM
Total assets
Total borrowing
Interest Income
Interest expenses
Total income
PAT
Gross NPA
Net NPA
Overall CAR
101 101 101 101 101
18,193 16,259 14,241 11,077 9,146
207,993 192,995 166,164 143,515 124,371
218,333 202,110 172,600 150,244 129,969
192,014 177,576 150,374 132,077 114,784
19,606 17,256 14,730 13,918 12,279
14,817 12,892 11,144 10,231 9,303
19,682 17,341 14,820 14,080 12,484
2,402 2,431 2,003 1,931 1,661
2.86 1.54 0.78 0.43 0.45
1.99 1.08 0.43 0.14 0.22
13.89 14.36 15.49 15.64 17.04
Source:CRISIL Research. Financials are displayed as per the standard adjustments done by CRISIL.Note: No Reported Financials Available
CHOLAMANDALAM INVESTMENT & FINANCE LTD
Rating: Rating change in last month:Sector:
About:
CRISIL AA+ (stable)/A1+, ICRA AA+ (stable)/A1+, CARE AA+ (stable), India Ratings AA+(Stable) No change
FINANCIAL SERVICES
• About: CIFCL, a non-banking finance company, is a part of the Chennai-based Murugappa Group of companies. Incorporated in 1978, CIFCL operates through 999 branches across 27 states with assets under management of Rs. 57,494 crore as of June 2019. The company’s core business segments include vehicle finance (75%) and HE loans (21%).
• CIFC reported a 4QFY21 PAT of INR2.4b. Disbursements/AUM grew 43%/16% YoY, while asset quality was stable. In FY21, CIFC delivered NII/PPOP/PAT growth of 32-44% YoY. It also increased its total provision buffer by 90bp to 3.6% in Fy21.
• GNPL ratio increased 100bp QoQ to 3.8%. Stage 2 loans declined 20bp QoQ to 6.2%, despite classification of ~2% of restructured loans under Stage 2.
• Chola continues to mobilize funds at attractive rates. High liquidity on-balance sheet and strong ALM position augur well amidst lower collections over the next few months.
Mar-2021Parameter (` Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
Equity Share Capital
Reported Networth
AUM
Total assets
Total borrowing
Interest Income
Interest expenses
Operating expenses (incl. depreciation)
Total income
PAT
Gross NPA
Net NPA
Overall CAR
164 164 156 156 156
9,560 8,172 6,176 5,098 4,313
65,869 55,434 52,637 42,271 27,813
74,525 63,970 57,408 44,095 31,578
63,730 55,005 50,567 38,330 24,207
9,224 8,124 6,565 5,236 4,634
4,576 4,592 3,589 2,659 2,137
_ _ _ _ _
9,514 8,637 6,932 5,472 4,662
1,515 1,052 1,186 918 719
4.11 3.86 2.47 3.43 4.7
2.25 2.26 1.16 1.83 3.2
19.1 20.69 17.36 18.24 18.64
Source: CRISIL Research. Financials are displayed as per the standard adjustments done by CRISIL.Note: No Reported Financials Available
LARSEN AND TOUBRO LIMITED
Rating:
Rating change in last month:
Sector:
About:
CRISIL A1+/AAA (Stable) ICRA A1+/AAA (stable) India Ratings A1+/AAA (stable)
No change
CONSTRUCTION
L&T is the largest company in the engineering and construction sector in India, with interest in projects, infrastructure, real estate development, manufacturing, IT and financial services. It provides EPC services in all major segments such as buildings & factories, transportation and civil infrastructure, power (generation – thermal, hydro and nuclear, transmission and distribution), water and related, oil & gas and material handling. The company also undertakes infrastructure development project (roads, metro rail, power and transmission lines) through special purpose vehicles L&T IDPL, L&T Power Development and LTMRHL. We factor in the strong financial risk profile characterized by healthy cash accruals supported by its diversified revenue profile, stable operating profitability, and strong balance sheet marked by low net-gearing, strong liquidity position, and healthy financial flexibility arising from its exchange-listed subsidiaries. The liquidity position, thus, remains strong with cash and cash balances of ~Rs. 20,000 crore and unutilized working capital limits of ~Rs. 4,500 crore as on May 31, 2020. The capital structure of the company remains comfortable with gearing (Total Debt / Tangible Net-worth) of 0.4 times as on March 31, 2021 at a standalone level. L&T reported total operating income of Rs. 73,316 in FY21 vs 81,550cr in FY20 and PAT of Rs. 11,337cr vs 6,678cr in the previous year
Net Sales
Operating Income
Operating Margin (%)
Profit After Tax
Net Profit Margin (%)
Net Worth
Total Debt
Debt-Equity ratio (x)
73,316 81,520 80,936 73,235 64,661
73,316 83,026 82,559 75,068 66,274
9.9 8.5 8.8 9.6 10.2
11,337 6,679 7,491 5,387 5,454
15.5 8.0 9.1 7.2 8.2
60,310 52,091 49,648 48,780 45,687
23,809 25,785 11,990 10,561 10,558
0.4 0.5 0.2 0.2 0.2
Mar-2021Parameter (`Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
GRASIM INDUSTRIES LIMITED
Rating:
Rating change in last month:
Sector:
About:
CRISIL AAA (stable)/A1+, ICRA AAA(stable),India Ratings ltd AAA(stable),A1+
No change
CEMENT & CEMENT PRODUCTS
Incorporated in 1947, Grasim is the flagship company of the Aditya Birla group. It commenced operations in 1948 as a textile manufacturer and is the sole producer of VSF in the domestic market. The viscose segment also comprises the viscose filament yarn business of merged ABNL and acquired rights to manage and operate Century Textiles and Industries Ltd's ('CRISIL AA/stable/CRISIL A1+') rayon division with effect from February 1, 2018. The chemical segment comprises caustic soda, allied chemicals, and epoxy. Also, the company has presence in fertilisers, textile and insulators.
UltraTech, Grasim's 57% subsidiary, is the largest cement producer in India. On August 11, 2016, Grasim announced a composite scheme of merger of ABNL with itself, followed by demerger of the financial services business into a separate listed entity, ABCL. Following the merger, effective July 1, 2017, ABCL was listed in September 2017. Grasim holds 54.24% of equity in ABCL as on 31st March, 2021.
Net Sales
Operating Income
Operating Margin (%)
Profit After Tax
Net Profit Margin (%)
Net Worth
Total Debt
Debt-Equity ratio (x)
12,386 18,387 20,370 15,651 10,208
12,386 18,661 20,624 15,835 10,345
12.6 12.8 20.1 19.6 20.8
905 1,270 515 1,769 1,560
7.3 6.8 2.5 11.2 15.1
41,745 36,580 40,780 43,513 16,202
4,011 5,068 3,311 2,969 701
0.1 0.1 0.1 0.1 0
Mar-2021Parameter (`Crore) Mar-2018Mar-2019Mar-2020 Mar-2017
Axis Bank Ltd
Bajaj Finance Ltd.
Cholamandalam Investment & Finance Co.Ltd
Grasim Industries Limited
HDFC Bank Ltd
Hindustan Petroleum Corp Limited
Housing Development Finance Corporation Limited
ICICI Bank Ltd
Indian Oil Corporation Limited
Indian Railway Finance Corporation Limited
Indusind Bank Limited
Larsen And Toubro Limited
LIC Housing Finance Ltd
National Bank For Agriculture And Rural Developm
National Housing Bank
Ntpc Limited
Power Finance Corporation Ltd
REC Limited
Reliance Industries Ltd
Ultratech Cement Ltd
1 1
1
1 1
1
1
1
1 2 2 1
1
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1 1 2
1 1
1 1 1
1 1 2
1 1 2 1
1 1
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Principal Low Duration
Fund
Principal Short Term Debt Fund
Principal Ultra
Short Term Fund
Principal Cash
Management Fund
Issuer
Issuer wise Holding as on July 31, 2021
DISCLAIMER
Disclaimer:
The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme. The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Diversification does not guarantee investment returns and does not eliminate the risk of loss. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Past performance may or may not be sustained in future. The views and strategies described may not be suitable for all investors. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. Investors are advised to consult their Investment advisors for determining their risk appetite and Tax Advisor before taking any investment decision.
The data/statistics/ comments are given to explain general market trends in the securities market, it should not be construed as any research report/research recommendation.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
Principal Ultra Short Term Fund(An open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 months and 6 months)
~This Product Is Suitable For Investors Who Are Seeking -
• Income over a short term investment horizon.
• Investment in Debt & Money Market instruments. RISKOMETER
Investors understand that their principal will be at low to moderate risk
woL
eatredoMHigh
Very High
Moderately ot woL
High
~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
Principal Short Term Debt Fund (An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1 year and 3 years)
~This Product Is Suitable For Investors Who Are Seeking -
• Income over a medium term investment horizon.
• Investment in Debt & Money Market Instruments.RISKOMETER
Investors understand that their principal will be at moderate risk
woL
eatredoMHigh
Very High
Moderately ot woL
High
~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
Principal Cash Management Fund (An Open-ended Liquid Scheme)
~This Product Is Suitable For Investors Who Are Seeking -
• Income over a short term investment horizon.
• Investment in debt & Money Market Instruments, with maturity not exceeding 91 days.
RISKOMETER
Investors understand that their principal will be at low to moderate risk
woL
eatredoMHigh
Very High
Moderately ot woL
High
~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
Principal Low Duration Fund (An open ended low duration debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 6 months and 12 months)
~This Product Is Suitable For Investors Who Are Seeking -
• Income over a short term investment horizon.
• Investment in Debt & Money Market Instruments.RISKOMETER
Investors understand that their principal will be at low to moderate risk
woL
eatredoMHigh
Very High
Moderately ot woL
High