TRIS Rating affirms the company rating on Srisawad Finance PLC (BFIT) at ?BBB+? with a ?stable? outlook. The rating primarily reflects the company?s status as a core subsidiary of Srisawad Corporation PLC (SAWAD). The rating on BFIT is equivalent to the company rating on SAWAD (?BBB+/Stable? rated by TRIS Rating).
KEY RATING CONSIDERATIONS
High level of integration
TRIS Rating assesses BFIT as a core subsidiary of SAWAD. The company serves as one of SAWAD?s business units that enables the group to provide its products and services to a more comprehensive client base. BFIT?s business also remained highly integrated with SAWAD, with its business strategy and risk control policies dictated by SAWAD. In terms of operations, BFIT relies on SAWAD?s branch network for underwriting and lending activities. In recent years, BFIT?s loan portfolio has made up 50% of SAWAD?s total consolidated loans. However, the proportion decreased to around 25%-30% in 2020 and the first quarter of 2012 due partly to BFIT?s more stringent underwriting criteria. Despite the decrease, we believe that BFIT is likely to remain a core member of SAWAD over the medium term, considering the benefits of stronger loan yields thanks to BFIT?s higher interest rate ceiling of 36% allowed for specific product programs under the finance company license.
Declining, but still important revenue contribution
BFIT?s ability to continuously deliver satisfactory financial performances and provide significant revenue contributions to SAWAD is a factor supporting its status as a core subsidiary of the group. Over the past few years, the company?s revenue accounted for 30%-35% of SAWAD?s consolidated revenue. Even though BFIT?s loan portfolio has been contracting, causing the revenue contribution to drop to 22% at the end of the first quarter of 2021, it remains sizeable and important for the group, in our view. However, a continuous decline in the company?s revenue contribution to the group could potentially alter our view on the company?s level of strategic importance to the group, which could lead to a negative implication for the rating assigned to the company.
Ongoing financial support
Past records show that SAWAD previously provided credit lines to BFIT of THB1.0-2.5 billion. SAWAD also injected THB5.9 billion in capital that raised its shareholding in BFIT to 82% in 2019. The increase in shareholding, in our view, demonstrates a long-term commitment. We believe SAWAD will provide timely support to BFIT if needed.
BASE-CASE ASSUMPTIONS
TRIS Rating?s base-case assumption is that BFIT will remain a core subsidiary of SAWAD.
RATING OUTLOOK
The ?stable? outlook reflects the outlook of the rating on SAWAD and our expectation that BFIT will maintain its status as a core subsidiary of SAWAD and continue to receive strong supports from its parent company.
RATING SENSITIVITIES
The rating and outlook on BFIT move in tandem with those on SAWAD, given its status as a core subsidiary of SAWAD. The rating can also be downgraded if TRIS Rating perceives a weakening in the degree of importance of the company to SAWAD or any indication of reduced support from SAWAD, although we view that such a scenario is unlikely in the next few years.
COMPANY OVERVIEW
BFIT was established in 1972 as a finance company initially named Bangkok First Investment & Trust PLC. BFIT held four finance licenses including business of finance for commerce, business of finance for development, business of finance for deposition and consumption, and business of finance for housing. The company also acted as a debentureholder representative and/or trustee.
In 2017, SAWAD became BFIT?s major shareholder, with an equity stake of 36.35%. SAWAD, as the non-operating holding company, filed documents to the Bank of Thailand (BOT) in order to form a financial conglomerate. BFIT was renamed Srisawad Finance PLC in June 2017 and began offering secured personal loans backed by customer vehicles under loan agreements. In 2019, SAWAD injected THB5.9 billion, increasing its shareholding in BFIT to 82.04% from 45% in 2018.
RELATED CRITERIA
- Group Rating Methodology, 13 January 2021
Srisawad Finance PLC (BFIT)
Company Rating: BBB+
Rating Outlook: Stable