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January 13, 2017

Zen Lefin Private Limited

Instrument Amount Rated Rating Action
(in Rs crore ) (January 2017)
Unsecured Redeemable Non Convertible Debenture 16 [ICRA]BBB- (stable); Assigned
Secured Redeemable Non Convertible Debenture 17 [ICRA]BBB- (stable); Assigned

*Instrument details are provided in Annexure-1

Rating Action
ICRA has assigned a rating of [ICRA]BBB- (stable) to the proposed Rs 16 crore unsecured redeemable non
convertible debenture and Rs 17 crore secured non convertible debenture programme of Zen Lefin Private Ltd.
ICRA also has ratings outstanding of [ICRA]BBB-(stable) on the long term scale and [ICRA]A3 on the short
term scale on the Rs 300 crore Fund Based Bank Lines Programme of Zen Lefin Private Limited.

The rating is based on the healthy capitalization (networth of ~Rs 220 crore as on September 30, 2016),
qualified senior management team, strong systems and processes and track record of raising funds. The
rating is constrained by the limited track record of the company (started in 2013) and small but growing credit
portfolio (~Rs 291 crore of managed assets as of September 30, 2016). Further, with the high initial operating
expenses and small scale of operations the company is yet to report profits. The rating also factors in the risks
associated with the unsecured nature of lending and the business model which is relatively new in Indian
markets. The opinion on the rating would remain sensitive to the regulator’s standing on the future of co-lending
platforms which can define the scope of operations undertaken by the company.

Credit Strengths
 Strong and qualified senior management team with a blend of experienced people from the IT and
financial industry. Even though the founders haven’t worked in the lending space before, they have a
good mix of senior management people with relevant background.
 Demonstrated ability to raise capital; Series B funding (around Rs 170 crores) raised in May 2016
 Strong systems and processes which give them the ability to innovate and short turnaround time.
 Scalable business model as the management intends to move to a fee based model leveraging the
capital of banks and Financial Institutions which will limit its on-book exposure.
 Focus on smaller ticket size loans (Rs 15-50 lakhs business loans) helps bring granularity in the
portfolio and reduce concentration risk

Credit Challenges
 Limited track record with only two years of operations; healthy growth in the loan book in FY2016
 Untested business model in India; use of traditional underwriting practices for higher ticket size loans
(>Rs 15 lakhs) in addition to the algorithm based scoring is a source of comfort
 Ability to manage credit quality for a large and rapidly growing book and manage collections (which are
outsourced to external agencies) effectively across new geographies being ventured into.
 Unsecured lending to borrowers who are vulnerable to economic shocks indicates underlying asset
quality risks
 Company yet to achieve operational breakeven
Description of key rating drivers highlighted above

Capital Float (CF), trade/brand name for Zen Lefin Pvt. Ltd., primarily provides unsecured loans to SMEs
through a unique underwriting and financing model. The underwriting is done based on the various traditional
and non-traditional data points of the borrower, using algorithm based scoring model. The loan may be jointly
financed by CF and a group of lenders which includes Financial Institutions and High Networth Individuals
(HNIs). Although, the loans are unsecured in nature, the risk is partly mitigated by the use of technology and
data analytics whose robustness could be tested only in the medium term. The loans are of small ticket size
(average ticket size of around Rs 22 lakhs) and shorter tenure (maximum up to 4 years) which lends granularity
to the overall portfolio. The company has presence in more than 12 states with the top 4 states comprising
more than 75% of the overall portfolio as on September 30, 2016.

The company had an Asset under Management (AUM) of Rs 291 crore as on September 30, 2016 out of which
around 24% is off-book portfolio. The off-balance sheet exposure is gradually expected to grow further as the
company increases its co-lender base. The company still being in its initial stages of expansion reported losses
in the last 3 years. With growth in portfolio, the company is expected to report profits in FY2018.

The asset quality remained at a comfortable level (90+dpd of 1.02% as on September 2016) albeit on a low
seasoned book.

Analytical approach
To arrive at the ratings ICRA has taken into account the standalone financials of the firm along with
key operational and business developments in the recent past. The firm operates as a standalone entity and
doesn't have any subsidiary in place.

Link to applicable criteria

ICRA’s Credit Rating Methodology for Non-Banking Finance Companies

Company Profile

Capital Float (CF) is the trade name of Zen Lefin Pvt. Ltd. which is an NBFC lending primarily to SMEs. The
company was started in 2013 by co-founders Mr. Sashank Rishyasringa and Mr. Gaurav Hinduja and has
raised funds from ASPADA, Sequoia, SAIF partners and Creation Investments. CF is a part of the evolving fin-
tech industry or P2P lending companies. The industry targets the borrower segments which are difficult to
access by traditional banks. The use of technology helps to reduce the turnaround time as well as underwrite
the borrowers based on non-traditional data points from online space like social media, e-commerce sites etc.
The company reported a net loss of around Rs 23.34 crore for H1FY2017 on a total managed asset base of Rs
409.39 crore as on September 2016. The reported networth of the company stood at around Rs 219.67 crore
as on September 2016 after the company raised Series B funding of Rs 170 crore in May 2016.

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years:

Table: Rating History

S.No Name of Current Rating Chronology of Rating History for the past 3 years

Type Rated January FY2016 FY2015 FY2014

amount 2017
Crores) June 2016

1 Unsecured Long term 16 [ICRA]BBB- NA NA NA

Redeemable (stable);
Non Assigned
2 Secured Long term 17 [ICRA]BBB- NA NA NA
Redeemable (stable);
Non Assigned
3 Bank lines Long 300 [ICRA]BBB- [ICRA]BBB- NA NA
Programme term/short (stable)/A3; (stable)/A3
term Outstanding

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly
Complex". The classification of instruments according to their complexity levels is available on the website

Details of Instrument

Name of the Date of Coupon rate Maturity Date Size of Current Rating and
instrument issuance the issue Outlook
(Rs. Cr)
Unsecured 30-Dec- 13.85% December 30, 16 [ICRA]BBB-(Stable)
Redeemable Non 2016 2018
Secured 29-Dec- 13.25% June 23, 2022 17 [ICRA]BBB-(Stable)
Redeemable Non 2016
Cash Credit NA NA NA 57 [ICRA]BBB-(Stable)

Term Loan 1 Oct-2016 NA Apr-2017 10 [ICRA]BBB-(Stable)

Term Loan 2 Oct-2016 NA Oct-2017 8 [ICRA]BBB-(Stable)

Term Loan 3 Oct-2016 NA Oct-2018 20 [ICRA]BBB-(Stable)

Term loan 4 Nov-2016 NA Nov-2018 5 [ICRA]BBB-(Stable)

Unallocated bank NA NA NA 200 [ICRA]BBB-(Stable)/A3


Name and Contact Details of the Rating Analyst(s):

Analyst Contacts:
Mr Karthik Srinivasan
(Tel. No. +91 22-6114 3444)

Mr. Mohit Gupta (Tel. No. +91 22-61143449)

Ms. Remika Agarwal
(Tel. No. +91 80- 49225504)

Relationship Contacts:
Mr. L. Shivakumar (Tel. No. +91-22- 6114 3406)
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