2:1 Bonus Shares Allotted: NBFC Below Rs 300/Share Rallies On Ratings Upgrade

NBFC major, MAS Financial Services rallied over 4.4% on Monday to hit an intraday high of Rs 297 apiece. The stock ended at Rs 294.30 apiece, up by 3.50% on BSE. The latest upside can be attributed to a positive rating by CARE Egde on the company's debentures, bank facilities, and commercial paper. The company recently allotted bonus shares in the ratio of 2:1.

In its release on April 1, CARE Edge upgraded the Company's Long Term Bank Facilities and Non-Convertible Debentures rating to 'CARE AA- (Outlook: Stable)' from 'CARE A (Outlook: Positive)'.

In its rationale, CARE said that the revision in the ratings assigned to long-term bank facilities and various long-term debt instruments of MAS Financial Services Limited (MFSL) factors in the continued growth momentum in the overall business with scale-up of asset under management (AUM) which stood at over ₹10,000 crore (consolidated) as on December 31, 2023, relatively stable asset quality and stable profitability levels demonstrated in the past many years.

Further, CARE's note added that ratings continue to derive strength from the long-standing track record of MFSL in the lending business, experienced promoters and senior management team, diversification in the loan book with presence in micro enterprise (ME) loans, small and medium enterprises (SMEs), two-wheeler loans, commercial vehicle (CV) loans, and salaried personal loan book as well as a tie-up with multiple NBFCs for sourcing business and co-lending agreements, established appraisal systems, comfortable capitalisation levels and diversified resource profile.

The company also regularly raises funds through the direct assignment (DA) which has helped the company scale up AUM on a relatively lower net worth base as well as maintaining a comfortable liquidity profile, it said.

However, CARE also said that ratings are constrained by its relatively concentrated customer profile on account of exposure to lending to NBFCs which stood at 32.93% of AUM as of December 31, 2023, moderate geographical diversification, its exposure to the ME which is largely unsecured and exposure to the SME sector, relatively riskier, and moderate gearing levels.

Among the positive factors that will likely lead to further rating action on MAS Financial are -- Significant and consistent scale-up of operations along with improved geographic diversification & stable asset quality performance; and Improvement in the financial performance with return on total assets (ROTA) of around 3.0% on a sustained basis.

But ratings could be downgraded if the case be -- Weakening of asset quality parameters, with NS3/ NNPA of above 2% on a sustained basis; Overall gearing exceeding 4.5x or AUM (including co-lending and assignments) to net worth exceeding 6.5x; and Significant decline in profitability with ROTA below 1.0%.

Earlier in February, MAS Financial announced that it 10,93,24,086 equity shares of Rs.10/- each as fully paid bonus equity shares to the eligible Members of the Company whose names appear in the Register of Members of the Company /List of Beneficial Owners as on the Record Date i.e., February 22, 2024 in the ratio of 2:1 i.e. 2 (Two) new fully paid-up Equity Share of Rs.10/- each be issued for every 1 (One) existing fully paid-up Equity Share.

Accordingly, the bonus ratio was 2:1.

Incepted in 1995, with a plethora of retail finance options in its arsenal, MAS is focused on fulfilling the requirements of lower-income and middle-income groups of society. The company offers Financial Services for Micro Enterprises Loans, SME Loans, Home Loans, Two Wheeler Loans, Used Car Loans, and Commercial Vehicle Loans to satisfy their varied needs. The focus remains on the vast lower-income and middle-income groups of the society, spread across urban, semi-urban and rural areas, including formal and informal sectors.