20210705002 - Credit Brief Brochure - July 2021

CREDIT INSIGHT

July 6, 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

Bajaj Finance Ltd

ICICI Securities Ltd

Reliance Jio Infocomm

Limited

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 ` 5462 cr with operating income of 44726 crore, against a net profit of 5810 crore with operating income of

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 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


HOUSING DEVELOPMENT FINANCE CORPORATION LTD


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 ` 5,16,800 compared to an asset base of 4,58,776 crore in FY2019. HDFC reported Profit After Tax (PAT) of 17,769 crore during the year ended March 31, 2020 compared to

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-2020Parameter (` Crore) Mar-2017Mar-2018Mar-2019 Mar-2016


Reported Networth

AUM

Total assets

Total borrowing

Interest Income

Interest expenses

Total income

PAT

Gross NPA

Net NPA

Overall CAR

346 344 335 318 316

86,158 77,355 65,265 39,817 34,243

442,262 402,257 358,721 296,388 260,230

525,341 458,770 398,905 336,354 288,749

419,102 365,266 319,716 279,732 237,639

42,683 38,194 32,542 30,378 27,767

31,076 27,897 23,544 20,934 19,374

49,636 42,827 40,598 33,662 31,402

17,770 9,632 10,959 6,869 6,625

2 1.18 1.12 0.8 0.7

1.49 0.84 0.8 0.54 0.48

17.59 19.08 19.16 15.79 16.55



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

CHOLAMANDALAM INVESTMENT & FINANCE LTD


About:

CRISIL AA+ (stable)/A1+, ICRA AA+ (stable)/A1+, CARE AA+ (stable), India Ratings AA+(Stable) No change

FINANCIAL SERVICES

• 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.



Reported Networth

AUM

Total assets

Total borrowing

Interest Income

Interest expenses

Total income

PAT

Gross NPA

Net NPA

Overall CAR

164 156 156 156 156

8,172 6,176 5,098 4,313 3,657

55,434 52,637 42,271 27,813 25,352

63,970 57,408 44,095 31,578 28,393

55,005 50,567 38,330 24,207 22,576

8,124 6,565 5,236 4,634 4,177

4,592 3,589 2,659 2,137 2,030

8,637 6,932 5,472 4,662 4,193

1,052 1,186 918 719 568

3.86 2.47 3.43 4.7 3.5

2.26 1.16 1.83 3.2 2.1

20.69 17.36 18.24 18.64 19.68

BAJAJ FINANCE LTD.

Rating:

Rating change in last month:Sector: About:

CRISIL AAA (stable)/A1+ , ICRA AAA (stable)/A1+, CARE AAA (stable)/A1+,India Ratings AAA (stable)/A1+

No changeFINANCIAL SERVICESBajaj Finance Limited (BFL) is an NBFC-D-SI with a diversified loan portfolio and a pan-India presence. While the companychol was originally set up to provide finance for the purchase of two-wheelers and three-wheelers manufactured by Bajaj Auto, it diversified into other segments over the years. Currently, it operates across six broad categories – Consumer Lending, Commercial Lending, Rural Lending, SME Lending, Deposits and Partnerships & Services. Under the category of Partnerships & Services, the company offers products like health insurance, extended warranty, comprehensive asset care, co-branded credit cards and wallets. On a consolidated basis, BFL reported a net profit after tax of Rs. 4420 in FY21 vs 5264cr in FY20.The company is rated AAA by all the rating agencies rating it. Bajaj Finance (BAF)’s 4QFY21 PAT grew 42% YoY / 18% QoQ to INR13.5b. For FY21, the company reported AUM/NII/PPoP growth of 4%/3%/6% YoY. However, PAT declined 16% on the back of aggressive cleanup stress due to COVID. The proforma GNPL ratio declined from 2.9% to 1.8% QoQ. BAF wrote off ~INR15b worth of loans (1.0% of loans). The company has a provisioning coverage ratio of 58% on GS3 and 181bps on GS1&2. BAF continues to carry COVID-related provisioning of INR8.4b. The company has largely maintained liquidity on the books (at 12.5% of borrowings) – contrary to the management’s guidance for a further reduction in the coming months to a run-rate of 7–8%.



Reported Networth

AUM

Total assets

Total borrowing

Interest Income

Interest expenses

Operating expenses (incl. depreciation)

Total income

PAT

Gross NPA

Net NPA

Overall CAR

120 115 115 109 54

31,813 19,564 15,817 9,600 7,427

113,667 95,447 75,746 41,397 42,949

137,828 108,346 81,499 65,041 47,979

104,210 87,438 64,457 50,298 37,025

20,668 15,346 11,511 9,001 6,767

8,074 6,037 4,649 3,853 2,959

5,360 4,200 3,660 2,510 1,920

23,221 17,056 12,397 9,953 7,277

4,836 3,890 2,455 1,837 1,278

2 1.54 1.41 1.68 0.44

0.79 0.73 0.45 0.44 0.28

25.01 20.66 23.98 20.3 19.5

Source: CRISIL Research. Financials are displayed as per the standard adjustments done by CRISIL.

ICICI SECURITIES LTD


About:

CRISIL A1+/AAA (Stable) ICRA A1+/AAA (stable) No change

FINANCIAL SERVICES

ICICI Securities Limited (I Sec), majority owned subsidiary of ICICI Bank (79.22% stake), offers broking services to institutional and retail clients in the cash equity and derivatives markets. ICICI Bank have infused capital aggregating Rs 100 crore into I-Sec in the past years.. The company also distributes public issues to corporates and high net worth individuals, and has a strong presence in investment banking. It has a large client base in the online retail broking segment. The company is also growing its wealth management business. I Sec distributes many financial market products, including insurance, mutual funds, and loans, for the ICICI group. In addition, ISec also distributes mutual fund products of other players in the market.

For fiscal 2021, I-Sec reported a PAT of Rs 1068 crore on a total income of 2586 crore, against a PAT of 542 crore on a total income of 1725 crore for the previous fiscal..

`` `

Networth

Total assets

TOTAL BORROWINGS

Total Income

Profit After Tax

1,191 1,034 839 485 394

6,131 5,894 4,118 2,976 1,380

1,498 447 672 395 173

1,724 1,708 1,835 1,408 1,127

537 487 549 338 236


RELIANCE JIO INFOCOMM LIMITED

Rating:

Rating change in last month:

Sector:

About:

CRISIL A1+/AAA (Stable), ICRA AAA (stable), CARE A1+/AAA(stable),India Ratings A1+/AAA(stable)

No change

TELECOM

RJIL, a subsidiary of RIL, has built an all-IP data network with the latest 4G LTE technology, which supports voice over LTE. RIL holds 99.44% equity stake in RJIL. The network can be upgraded to support even more data, as technologies advance on to 5G and beyond. The company has created an eco-system comprising network, devices, applications and content to provide seamless services. We factor in the strong managerial and financial support that Reliance Jio Infocomm Limited (RJIL) derives from its parent Reliance Industries Limited (RIL; rated [ICRA]AAA(Stable)/[ICRA]A1+ and Baa2 by Moody’s), which holds 99.44% equity stake in the former. Also we consider the importance placed by RIL on the development and growth of the telecom business. The same is substantiated by RIL’s continued, demonstrated support to RJIL in terms of sizeable capital contribution as well as its stated intent to support RJIL’s operations and its financial obligations. In addition, RJIL's leadership position in terms of revenue market share in the Indian telecom industry, along with strong traction in customer acquisitions provides comfort. These strengths are partially offset by RJIL's exposure to a competitive telecom industry and regulatory risks in this space.

Net Sales

Operating Income


Profit After Tax


Net Worth

Total Debt


54,316 38,838 20,154 0 0

54,316 38,838 20,154 0 0

40.0 38.9 33.8 -13162.5 -4702.3

5,562 2,964 723 -31 -16

10.2 7.6 3.6 -9803.1 -3570.5

110,311 -22,610 34,211 -1,548 -4,277

23,242 96,421 58,592 75,195 47,647

0.2 -4.3 1.7 -48.6 -11.1


LARSEN AND TOUBRO LIMITED

Rating:


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 ~ 20,000 crore and unutilized working capital limits of ~` 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 73,316 in FY21 vs 81,550cr in FY20 and PAT of 11,337cr vs 6,678cr in the previous year

`

`

`

Net Sales

Operating Income


Profit After Tax


Net Worth

Total Debt


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


GRASIM INDUSTRIES LIMITED

Rating:


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


Profit After Tax


Net Worth

Total Debt


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


Axis Bank Ltd

Bajaj Finance Ltd.

Cholamandalam Investment & Finance Co. Ltd.

Grasim Industries Limited

HDFC Bank Ltd.

Hindustan Petroleum Corp Ltd.

Housing Development Finance Corporation Ltd.

ICICI Bank Ltd.

ICICI Securities Ltd.

Indian Oil Corporation Ltd.

Indian Railway Finance Corporation Ltd.

Indusind Bank Ltd.

Larsen And Toubro Ltd.

LIC Housing Finance Ltd

National Bank For Agriculture And Rural Development

National Housing Bank

NTPC Ltd.

Power Finance Corporation Ltd.

Power Grid Corporation Of India Ltd

REC Ltd.

Reliance Industries Ltd.

Reliance Jio Infocomm Ltd.

Ultratech Cement Ltd.

1 1

1

1 1

1

1

1 1

2 2 1

1

1

1 1

1 1 2

1 1

1 1 1

1 1 3

1 1 1 1

1 1

1 2

1 1

1

1 1 2

1 1

1

1 1 1

Principal Low Duration

Fund

Principal Short Term Debt Fund

Principal Ultra

Short Term Fund

Principal Cash

Management Fund

Issuer

Issuer wise Holding as on June 30, 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


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)


• 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


Principal Cash Management Fund (An Open-ended Liquid Scheme)



• Investment in debt & Money Market Instruments, with maturity not exceeding 91 days.

RISKOMETER


woL

eatredoMHigh

Very High

Moderately ot woL

High


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)



• Investment in Debt & Money Market Instruments.RISKOMETER


woL

eatredoMHigh

Very High

Moderately ot woL

High

Documents

20210705002 - Credit Brief Brochure - July 2021