* Extensive experience of promoters and longstanding presence
Managing director, Mr. Alok Sondhi, and joint managing director, Mr. Vivek Sondhi, have been in the asset financing business for more than 35 years. The group has been engaged in the business for almost 60 years and has passed through several economic cycles. It has maintained a strong brand in Punjab, Delhi, Haryana, and Chandigarh and competes with banks and other large non-banking financial companies (NBFCs).
* Adequate capital position
Consolidated networth was Rs 53 crore and overall capital adequacy ratio 25% as on December 31, 2016. Overall gearing was also comfortable at 2.9 times and has remained below 4 times over the past seven years. Furthermore, the group infused additional equity of Rs 4 crore during fiscal 2016, which not only strengthened capital positon but also ensured the group is compliant with revised RBI norms of maintaining deposits at below 1.5 times of networth. Given moderate growth plans, gearing is expected to remain steady over the medium term.
* Average asset quality
Gross non-performing advances (NPAs) increased to 4.2% as on December 31, 2016, from 2.5% as on March 31, 2015, due to adherence to revised asset recognition norms by RBI; starting April 1, 2016, the group is recognising gross NPAs at 150+ dpd. In addition, CRISIL believes the group's gross NPA will increase further by another 150-200 basis points by March 2017 due to revision in NPA recognition to 120 dpd from 150 dpd. The 90+dpd at 9.5% as on December 31, 2016, remains high, though it has improved from 11.5% as on March 31, 2016. Impact of demonetisation on the asset quality is expected to be limited as a large proportion of borrowers have longstanding relationship with the group. Ability to improve asset quality over the medium term will, nevertheless, remain a key rating sensitivity factor.
* Small scale of operations with regional concentration
PKF group's scale of operations is small and geographically concentrated in the northern states of Punjab, Delhi, Haryana and Chandigarh. Despite being in operations for six decades, the group remains a small player with an advance book of Rs 186 crore as on December 31, 2016, and a network of 11 branches, the group remains a small player in the industry. Though the group intends to increase in operations over the medium term, the group is likely to remain a relatively small retail financing player with regional focus, over the medium term.