The credit rating of DirectLeasing Ltd (hereinafter, DirectLeasing, or the Company) has been upgraded due to the improvement of the lease portfolio quality assessment. Overall, the rating is based on the moderately low assessment of the business profile, satisfactory capital adequacy assessment, adequate risk profile assessment, and the satisfactory assessment of funding and liquidity.

DirectLeasing is a leasing company that has operated in the market for more than 17 years. The Company leases out passenger vehicles and trucks, buses, special-purpose machinery, and equipment. The Company’s clients include small and medium-sized enterprises, sole proprietors, and individuals, mainly in the Central Federal District (this region accounted for about 75% of the portfolio as of June 30, 2023). The Company’s sole owner is V. O. Bochkov.

key assessment factors

Moderately low business profile assessment. In H1 2023, DirectLeasing continued to hold insignificant positions in terms of volume of new business and lease portfolio size among Russian leasing companies. At the same time, the Company has recorded significant growth that outstripped the growth of its nearest competitors. The volume of the portfolio grew by 78% over the 12 months preceding June 30, 2023 and recorded 42% growth in 2022. The largest shares of business are contributed by leasing of passenger vehicles and trucks (46% of the portfolio), road-building machinery (10%), minibuses (9%), and metal industry equipment (15%), and medical equipment (10%). Other leasing business accounts for comparatively small shares. ACRA assesses the liquidity of leased assets as above medium. The Agency notes that the lease portfolio diversification is growing in terms of leased assets, with the declining share of motor vehicles and the growing share of equipment. As of June 30, 2023, the largest client’s share in the lease portfolio was 7.5% (8.1% as of June 30, 2022), while the aggregate share of the 10 largest clients was 35% (37% as of June 30, 2022).

Satisfactory capital adequacy assessment. The Company has relatively low business profitability. The averaged capital generation ratio (ACGR) for the past five years amounts to 64 bps. According to RAS reporting for 6M 2023, the capital adequacy ratio was 5.3%. By the end of 2023, the owner is expected to replenish the Company’s capital by RUB 50 mln, which is positive for the capital adequacy assessment. Moreover, the Company does not pay dividends in order to maintain its growth.

Adequate-quality lease portfolio. As of June 30, 2023, non-performing and potentially non-performing leases amounted to 3.7% of expected revenues from leasing, which is much lower than the indicator as of June 30, 2022 (7.9%). At the same time, in ACRA’s opinion, high growth of the lease portfolio may potentially lead to an increased share of non-performing assets in the future. However, the Agency notes that the Company does not have any significant market risks, while and operational risks are confined.

Diversified funding structure. As of June 30, 2023, the main source of the Company’s debt financing were bank loans, which amounted to 52% of the balance sheet total. In addition, the Company had three outstanding bond issues worth a total of RUB 555 mln (22% of balance sheet total). In Q3 2023, the Company issued exchange-traded bonds for RUB 200 mln, and another bond issue for RUB 300 mln is expected on November 2023. As of June 30, 2023, the share of the largest lending bank was 11% of the balance sheet total, while the five largest lending banks accounted for 31%.

Satisfactory liquidity position. In the base case scenario, which takes into account plans to develop new business, the Company demonstrates positive cash flow at the end of every quarter over the next 12–24 months (the projected current liquidity ratio exceeds 1.0). In the stress scenario, a liquidity deficit is possible which may be overcome through prompt management of cash flows by adjusting the number of new lease contracts.

key assumptions

  • Maintaining the current business model over the 12 to 18-month horizon.

  • Capital adequacy ratio (CAR) under RAS at no less than 5% over the next 12 to 18-months.

  • Share of non-performing and potentially non-performing debt in the lease portfolio at less than 7.5%.

potential outlook or rating change factors

The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Strengthening of the Company’s positions in the Russian leasing market;

  • Improved capital adequacy assessment;

  • Improved funding and liquidity position.

A negative rating action may be prompted by:

  • Lower capital adequacy due to active growth of business or higher cost of risk;

  • Deterioration of lease portfolio quality;

  • Deterioration of funding and liquidity position.

rating components

Standalone creditworthiness assessment (SCA): bb+.

Adjustments: none.

issue ratings

No outstanding issues have been rated.

regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Leasing Companies on the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.

The credit rating of DirectLeasing Ltd was published by ACRA for the first time on November 30, 2021. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by DirectLeasing Ltd, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the RAS financial statements of DirectLeasing Ltd. The credit rating is solicited and DirectLeasing Ltd participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to DirectLeasing Ltd. No conflicts of interest were discovered in the course of credit rating assignment.

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