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, or the SE), and 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 the higher assessment of Rosagroleasing’s business profile, which reflects both the growth of the Company’s business and the increase in diversification of activities in the segment of the country’s agro-industrial complex (AIC).
The Company was founded in 2001. Its operations are focused on modernizing the material and technical base of enterprises of the AIC of Russia, including via state subsidy programs. The Company does not have its own branch network; it provides financial leasing services throughout Russia via agent dealers. Rosagroleasing has been 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 for many years.
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 homogeneous 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.
The adequate business profile stems from the well-known brand of Rosagroleasing, strong competitive advantages, and extensive work experience in the AIC. Government subsidy mechanisms contribute to the sustainability of the revenue base and have a positive impact on the Company’s financial results. ACRA notes the strengthening of the Company’s market positions, including due to the specifics of its activities and its functional role.
Rosagroleasing has a broad client base, which ensures a low concentration of lessees — as of October 1, 2023, the 10 largest clients accounted for around 18% of the portfolio, and the largest client accounted for about 3.5%. The main share of the Company’s lease portfolio is wheeled agricultural machinery (about 80% of the portfolio). In addition, ACRA notes the diversification of the portfolio, which reflects the expansion of government subsidies to cover needs for equipment and machinery of processing and food industry enterprises. Vehicles account for 13% of the portfolio, while equipment for the food industry accounts for 3%.
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. Rosagroleasing pays significant attention to the introduction of robotization and digitalization in its activities and, among other things, works in various areas of the Company’s digital transformation. Rosagroleasing is completing the cycle of the current strategy, demonstrating early implementation of its indicators. At the same time, the active phase of strategy formation for the period 2025–2030 is underway, which reflects the further diversified development of the Company.
Significant supply of capital coupled with moderate ability to generate it. Rosagroleasing’s capital adequacy ratio (CAR) continues to be high, amounting to 59% as of October 1, 2023. The Company demonstrates fast growth of the lease portfolio (as of October 1, 2023, it had grown by 1.75 times year-on-year). Portfolio growth is reflected in a decrease in the CAR, however, the Agency does not expect a significant deterioration in the ratio over the 12 to 18-month horizon thanks to regular additional capitalization provided by the SE.
The averaged capital generation ratio (ACGR) over the past five years remained at a medium level and amounted to 111 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.
Moderately strong financial profile. As of October 1, 2023, the share of non-performing and potential non-performing assets in the Company’s current lease portfolio amounted to around 4%, however, payments overdue more than 90 days did not exceed 0.3% of the portfolio. Overall coverage of bad debts by IFRS reserves is assessed by ACRA as adequate. In addition, the Agency notes a reduction in the share of the volume of non-performing assets under rescinded financial lease contracts amid active portfolio growth.
Stable funding and liquidity position. The funding structure stems from the dominating role of equity capital in the Company’s liabilities (59% as of October 1, 2023). In 2022 and 2023, Rosagroleasing considerably increased the volume of bank financing, and as of October 1, 2023, the share of bank loans exceeded the share of bonds, and accounted for 23.5% of liabilities (vs. 3% a year earlier). The share of the largest bank accounts for 5.6% of liabilities.
The Company retains a positive supply of funds as of the end of each quarter over the next 12–24 months (the projected ratio of current liquidity over the 24-month horizon is around 1.01). A deficit of funds is also not projected in the stress scenario. 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 to 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 to 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: a-.
Adjustments: none.
Support: on par with the Russian Federation minus three notches.
issue ratings
No outstanding issues have been rated by ACRA.
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 of “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 additional services to “Rosagroleasing” Company. No conflicts of interest were discovered in the course of credit rating assignment.