The credit rating of "Rosagroleasing" Company (hereinafter, Rosagroleasing, or the Company) is based on the high likelihood of extraordinary support being provided to the Company by the supporting entity (hereinafter, the supporting entity, the SE), and fairly stable standalone creditworthiness, taking into account the functional significance of the Company for the agricultural sector of the Russian economy. The Company's standalone creditworthiness assessment (SCA) has been upgraded due to an increase in the capital generation indicator and a decline in the share of non-performing assets.
The Company was founded in 2001. Its operations are focused on modernizing the material and technical base of enterprises of the agro-industrial complex (AIC) of the Russian Federation via state subsidy programs. The Company does not have its own branch network; it provides financial leasing services throughout Russia via agent dealers. Rosagroleasing is the leader in terms of the volume of agricultural machinery leased in the country and one of the largest Russian leasing companies in terms of lease portfolio size.
key assessment factors
High likelihood of extraordinary support from the SE. If necessary, the Supporting Entity can carry out capital injections and provide financing sufficient to support the Company’s liquidity. ACRA’s very high assessment of the extent of support takes into account the following:
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Rosagroleasing is one of the key agents via which programs to develop and support the AIC are carried out;
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Rosagroleasing is a systemically important organization of the Russian economy, and also a systemically important organization of the AIC;
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Complete shareholder and organizational control over the Company exercised by the SE; a board of directors has been created at Rosagroleasing, including by representatives of the Supporting Entity;
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The Company regularly receives the SE's support in the form of capital injections and subsidies. This support for the Company is stipulated, among other things, by a specially issued regulation.
The shareholding structure of the Company determines the high probability of reputational risks for the SE in the event of the Company’s default. The risks of financial losses in the event that Rosagroleasing is unable to independently fulfill its obligations are assessed as moderate, taking into account the absolute scale of activities and the high share of equity capital in the Company’s liabilities. Given the Company’s structure of revenues and funding, ACRA assesses the degree of dependence of Rosagroleasing and the SE on homogenous risk factors as high.
ACRA’s opinion on the overall level of support for the Company from the SE is expressed in setting its final rating on a par with the Russian Federation minus three notches.
Rosagroleasing’s stable business profile is explained by the strength of its market position due to the specifics of its activities and functional role. Government subsidy mechanisms contribute to the sustainability of the revenue base and have a positive impact on the Company’s financial results.
Rosagroleasing has an extensive client base, which ensures a relatively low concentration of lessees — as of October 1, 2022, the 10 largest clients accounted for around 16% of the net lease investment, and the largest client accounted for about 3.4%. Diversification of the Company’s lease portfolio by types of equipment is low — about 81% of the portfolio consists of agricultural machinery, equipment, and livestock.
The quality of corporate governance and risk management of Rosagroleasing currently generally corresponds to the main risks of its activities. The Company has a multi-level risk management system and detailed regulation of risk management procedures, which were significantly improved after key management personnel were replaced in 2018–2019. The main assumptions of the current strategy of the Company are assessed as adequate.
Significant supply of capital coupled with moderate ability to generate capital. Rosagroleasing’s capital adequacy ratio (CAR) is high, amounting to 72% as of October 1, 2022. Given the fast growth of the lease portfolio, the Company’s CAR is gradually decreasing, however, thanks to regular additional capitalization provided by the SE, ACRA does not expect a significant deterioration in the ratio over the 12 to 18-month horizon.
The averaged capital generation ratio (ACGR) over the past five years has increased against the past year and amounted to 75 bps. The calculation of this indicator includes ACRA’s expert adjustment of the financial result for 2018 due to the additional creation of provisions for the impairment of leasing assets. In addition, the Company has demonstrated profitability of operations since 2019.
Decreasing share of non-performing assets. As of October 1, 2022, the share of non-performing and potentially non-performing assets in the Company’s current lease portfolio is moderate, having declined compared to the share as of October 1, 2021 on the back of expanding lease portfolio (the share of Stage 3 and POCI assets is around 4.1% of net leasing investments under IFRS). Overall coverage of bad debts by IFRS reserves is assessed by ACRA as adequate. In addition, the Agency notes a reduction in the volume of non-performing assets under rescinded financial lease contracts.
The stable funding and liquidity position. The funding structure stems from the dominating role of equity capital in the Company’s liabilities (72% as of October 1, 2022). In addition, starting from 2020, Rosagroleasing has placed bond issues, which amounted to around RUB 24 bln as of October 1, 2022 (the share of bonds in liabilities has decreased to 19%, given an increase in the total volume of liabilities).
The Agency takes into account that the estimated value of the projected current liquidity ratio in ACRA’s base case scenario on the 12-month horizon is tending to decrease on the back of an aggressive expansion of business scope. Negative dynamics of this ratio and the growing need for additional liquidity is observed in the stress scenario as well. It is worth noting that regular contributions made to the Company's capital by the SE are positive for the liquidity position. Furthermore, Rosagroleasing is able to obtain bank financing under open limits.
key assumptions
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The SE maintaining shareholder and operational control.
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Maintaining the current business model over the 12 to 18-month horizon.
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:
- Improved assessment of support for the Company due to its increased importance for the SE.
A negative rating action may be prompted by:
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Loss of shareholder control by the SE or reduced importance of the Company for the SE or the SE's reduced propensity to support the Company;
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Significant deterioration of the Company’s standalone creditworthiness.
rating components
SCA: bbb.
Adjustments: none.
Support: on par with the RF minus 3 notches.
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, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating assigned to "Rosagroleasing" Company was published by ACRA for the first time on March 2, 2022. 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 "Rosagroleasing" Company, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the RAS and IFRS financial statements of "Rosagroleasing" Company. The credit rating is solicited, and "Rosagroleasing" Company 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 "Rosagroleasing" Company. No conflicts of interest were discovered in the course of credit rating assignment.
