Avanse Financial Services Ltd (AFSL), the education loan company, will revamp its brand to reflect growing integration with its parent DHFL, a housing finance company.
AFSL is strategically important to DHFL and its promoters, as they have identified education finance as a long-term, high growth potential segment, according to rating agency CRISIL.
Education finance matches the promoters' vision of operating it as an integrated retail financial services player with a focus on building relationships with customers early in their life. AFSL started operations in January 2013. Its loan book was around Rs 2.4 billion as on March 31, 2015 (Rs 50 crore as on March 31, 2014).
The company's profitability could remain modest over the next two-three years. AFSL will remain a relatively small player in the domestic education loan segment, dominated by public sector banks. According to CRISIL, DHFL held 48.4 per cent in AFSL, while Wadhawan Global Capital held 37.8 per cent and International Finance Corporation, Washington (IFC) 12.97 per cent.
DHFL and other promoters have invested Rs 90 crore in AFSL till date and will continue to provide regular capital support in the medium-term.
AFSL has comfortable capitalisation with net worth of Rs 92 crore and overall capital adequacy ratio (CAR) of 37.9 per cent as on March 31, 2015.
The education loan company is expected to break-even over the next few quarters and internal accruals will start contributing to its capitalisation, CRISIL said.
The company intends to maintain overall CAR in the range of 18 to 20 per cent and gearing between four and five times on a steady-state basis. AFSL's ability to raise additional equity capital to support its strong growth plans over the medium-term will remain a key monitorable, it added.
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