Vedika Credit Capital Limited

Bond Opportunities
1

Starting a thread on Vedika Credit Capital since their NCDs keep popping up and I didn’t find a discussion here. They’re a Jharkhand-based MFI NBFC operating for a long time now, mostly JLG lending(JLG loans are small loans given to women in a group, where everyone promises to repay together) to women borrowers across eastern India. Their scale is not very large but they’ve been expanding steadily.

About the business

Vedika has been doing microfinance lending since 2007. Promoter family has been running it for years and they’ve expanded to 7 states now with about 190+ branches. West Bengal and Bihar make up more than half the book. AUM has moved from around ₹1,097 crore in FY23 to ₹1,452 crore as of March 2025. Mostly microloans (~70% of book) and the rest is small business loans and cross-sell.

Equity was infused recently ( around ₹50 crore in FY25) which helped bring leverage down from 4.6x to 3.45x. Capital adequacy is comfortable at 30%.

Financials

  • AUM: ₹1,452 crore (Mar 2025)

  • Net worth: ₹284 crore

  • PAT: ₹30.8 crore (FY25)

  • GNPA: rose to 2.06% (from 0.73% last year)

  • NNPA: 0%, because of provisions

  • PAR performance roughly in the 95% region

  • Cash & cash equivalents: ~₹150 crore (Mar 2025)

Acuite has two ratings on them:

  • BBB+ Stable on the smaller existing ₹22.9 crore NCD

  • Provisional A Stable on the proposed ₹200 crore NCD

The uplift on the proposed NCD is because of a structured payment mechanism — DSRA of 15% of issue size, T-n structure, and monitoring by the trustee. These enhancements are internal to the structure (no external guarantee).

The provisional rating will be finalised once the DSRA, trust deed, trustee appointment, etc. are in place.

Credit positives highlighted

  • Long operating history in MFIs

  • Decent asset quality considering the segment, though GNPA has ticked up

  • Strong liquidity buffer

  • Regular equity infusion

  • Diversifying geography beyond the initial 2–3 states

  • Ability to raise funds from a diversified lender base (30+ lenders)

Risks pointed out

  • Still an unsecured MFI lender serving lower-income borrowers

  • Capital structure is better than before but still on the higher side for a mid-sized MFI

  • Asset quality deterioration in FY25 (GNPA up)

  • Heavy dependence on two states

  • Proposed NCD rating entirely dependent on structure — without that structure, rating would have been BBB+

  • Off-book exposure also ~33% of AUM

Given MFIs’ volatility over the last few years, Vedika looks like one of the better-run mid-tier ones, but the rating uplift being structure-based is something worth understanding properly.

Anyone here tracking Vedika for a while? How do you see their shift in portfolio quality this year? Also curious if people have participated in their past NCDs.

For current MicroFinance Industry scenario, refer to this LinkedIn post

Disc: Not invested.

2

Was going through Vedika’s numbers and one thing that stood out is how much their entire story depends on keeping collections stable. GNPA has already gone up from ~0.7% to ~2% in a year, which is not small for an MFI operating mostly in Bihar/WB. These states have historically been volatile for microfinance, so the next 2–3 quarters will tell us whether this is just a normalization or an early warning.

3

the DSRA of 15% and the T–minus trigger mechanism look fine on paper, but DSRA/ISRA only protect timing of payments, not the ability of the borrower to ultimately repay. If the underlying book doesn’t behave, the DSRA is only a buffer, it will get used up quickly in a prolonged stress. So relying too much on the structure without tracking the operating numbers can be risky.