Rationale

 The rating downgrade reflects the irregularities related to the servicing of one of the loan account(s) of Aprajita Microfinance Association (AMA).

 Impact of material event

 On July 18, 2024, ICRA was informed of the irregularities related to the servicing of one of the loan accounts of AMA. ICRA observed insufficient balance in the cash credit account, which was used for the repayment of the scheduled instalments of the above-mentioned term loan, indicating stressed liquidity. This resulted in delays in servicing in April 2024 and delayed payments were observed in May 2024 and June 2024 as well. Consequently, the rating has been downgraded to [ICRA]D, in line with ICRA’s Policy on Default Recognition. It is to be noted that ICRA has been receiving monthly No Default Statements from the company, stating timely and regular servicing of debt obligations in April 2024, May 2024 and June 2024. The rating was moved to the ‘Issuer Not Cooperating’ category earlier in July 2024 and the rating is based on limited information on the company’s performance since the time it was last rated on March 19, 2024. Lenders, investors and other market participants are thus advised to exercise appropriate caution while using this rating as it may not adequately reflect AMA’s credit risk profile despite the downgrade. As a part of its process and in accordance with its rating agreement, ICRA has been trying to seek information from AMA to monitor its performance. Further, ICRA has been sending repeated reminders to the company for the payment of the surveillance fee that became due. Despite multiple requests by ICRA, AMA’s management has remained non-cooperative. In the absence of requisite cooperation and in line with ICRA’s aforesaid policy, the rating remains in the ‘Issuer Not Cooperating’ category. The rating is based on best available information.