Improving scale of operations

Vivriti has scaled up its AUM since the start of operations in FY2018 and it reached an AUM$of Rs. 4,708 crore as of September 2022. The AUM consists of exposures to financial service entities, followed by non-financial enterprises finance, co-lending, pass-through certificates and DA and Supply chain. Among segment-wise exposure to entities,$small business loan financing is the largest, contributing 19% to the AUM as of September 30, 2022 followed by microfinance institution. Going forward, the company is expected to reduce the share of its exposure to financial services entities further with increasing focus on the non-financial enterprises segment. The performance of the exposures in these segments would, however, remain a monitorable from a rating perspective.

Capital profile supported by regular infusions

Vivritiu2019s capitalisation profile is characterised by a managed gearing2 of 2.7x as of September 2022, improving from 3.0x as of March 2022, supported by the capital infusion of Rs. 220 crore from TVS Shriram Growth Fund in May 2022. Vivriti had raised Rs. 317 crore of capital from its existing investors in FY2022, Rs. 310 crore from Creation Investments LLC during January-May 2019, Rs. 350 crore from LGT Lightstone in March 2020 and a further Rs. 100 crore from Creations in FY2021. ICRA expects the capital raised till date to be sufficient for the envisaged growth in FY2023. Vivriti Asset Management Private Limited also raised Rs. 77 crore from investors in FY2022 and Q1 FY2023 for its sponsor requirements. Vivriti intends to maintain the gearing below 4x while embarking on a steep growth plan over the medium term. As such, its ability to obtain equity in a timely manner would be crucial, apart from securing commensurate funding lines, to grow the portfolio as envisaged.

Improving net profitability; managing interest margins would be key monitorable

Vivritiu2019s net profitability improved to 2.4% in H1 FY2023 from 1.9% in FY2022 mainly driven by the reduction in credit costs. Vivritiu2019s operating costs reduced to 1.4% in H1 FY2023 and 1.3% in FY2022 from 3.2% in FY2021 after hiving off its origination tech platform business into a separate entity. Provision & credit costs declined to -0.04% in H1 FY2023 from 0.4% in FY2022 and 1.6% in FY2021 backed by lower delinquencies. However, ICRA notes that the interest spreads have not improved in line with the increase in the AUM, given the competitive pressure amidst the increase in the cost of funds in H1 FY2023. Going forward, its ability to maintain stability in margins, given the expected increase in the cost of funds, would be a key monitorable.