CRISIL has assigned a rating of ‘P1+’ to JM Financial Ventures Ltd’s (JMFVL’s) short-term debt programme. The rating reflects benefits derived by JMFVL from linkages with the JM Financial group, JMFVL’s adequate capitalisation supported by healthy net worth and low gearing; and sufficient liquidity. These strengths are, partly offset by exposure of JMFVL’s revenues to volatility inherent to equity markets, and of the company’s investments to market risk.

JMFVL enjoys linkages with JM Financial Ltd (JM Financial, which owns 98 per cent of JMFVL), and other JM Financial group companies; JM Financial Investment Managers Ltd, an investment management and advisory company, helps JMFVL identify, evaluate, recommend, monitor and suggest entry/exit routes on investments. Also, the company shares the JM Financial group’s brand name and logo and receives managerial support from the group: JMFVL’s board of directors comprises senior executives of the group.

JMFVL is adequately capitalised, as indicated by its adequate net worth of Rs.3.2 billion, and minimal gearing as on March 31, 2008. The company’s policy of maintaining gearing at no more than 0.33 times is expected to help it remain comfortably capitalised. Moreover, JMFVL’s liquidity is sufficient: a sizeable proportion of its portfolio is deployed in liquid investments. The company maintains about 50 per cent of its portfolio in unencumbered equity shares in listed scrips. This provides an estimated cover of about two times its outstanding debt.

However, JMFVL’s asset book consists primarily of equity investments, which constitute an inherently risky asset class and is subject to significant price risk. Moreover, as about 50 per cent of JMFVL’s investment portfolio is invested in equity shares of listed companies (with a lock-in period of one year pursuant to the SEBI’s preferential allotment guidelines) and in equity shares of unlisted companies; this partially limits opportunities to liquidate/exit assets. JMFVL’s earnings profile is also subject to significant volatility as revenues are inherently linked to the state of capital markets and could significantly vary from year to year.

About JMFVL
A systemically important, non-deposit taking non-banking financial company, JMFVL was incorporated in 1989 as Kampani Finance Ltd. It got its present name in 2007. The company is part of the JM Financial group, with JMFL and Kampani Consultants Ltd holding stakes of 98 per cent and 2 per cent, respectively, in JMFVL. JMFVL invests in equity and equity-like instruments of Indian companies by leveraging on the group’s established expertise in the Indian capital markets. For 2007-08, the total income of JMFVL was a negative Rs. 14 million (including loss on sale of investments of Rs. 50 million) and the reported net loss was Rs.41 million. For 2006-07, the company reported a PAT of Rs. 113 million on a total income of Rs. 489 million. For the quarter ended June 30, 2008, JMFVL reported a PAT of Rs. 45 million on a total income of Rs. 57 million.