| Aditya Birla Money Limited | ||
| Rated amount enhanced for Commercial Paper | ||
| Rating Action | ||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||
| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on commercial paper programme of Aditya Birla Money Limited (ABML).
The rating on ABML reflects the benefit that ABML is expected to derive from its parent, Aditya Birla Capital Ltd (ABCL; rated ‘CRISIL A1+’). The strength is partially offset by the company’s modest earnings profile, and exposure to uncertainties inherent in the equity broking business. |
Analytical Approach The ratings reflect the strong support that ABML receives from its parent ABCL. This is because ABML is a strategically important subsidiary of ABCL, with extensive business and operational linkages, and a common brand. |
Key Rating Drivers & Detailed Description Strengths: Benefits that ABML is expected to derive from its parent, ABCL: The rating factors in ABML’s strategic importance to, and expectation of strong support from, its parent, ABCL. CRISIL Ratings believes that ABML, being the group’s broking and distribution arm, is an important subsidiary of ABCL, as it complements the group’s product offerings by providing a capital market platform. Further, financial services is expected to remain one of the key focus areas for the group. The significant holding (73.7% as on June 30, 2023) and shared brand name imply a strong moral obligation on ABCL to support ABML, both on an ongoing basis and in the event of any distress.
Weaknesses: Modest earnings profile: While the company turned profitable in fiscal 2015, after reporting losses for four consecutive years, and has now been reporting profits since then, the earnings profile remains modest. The revenue sources are well-diversified encompassing retail and institutional broking, fair value gains from wholesale debt market and portfolio management services. For fiscal 2023, ABML recorded a profit of Rs 33.9 crore on a total income of Rs 278.8 crore vis-à-vis profit of Rs 26 crore on a total income of Rs 234 crore in fiscal 2022. For the quarter ended June 30, 2023, it reported a profit of Rs 9.4 crore as compared to Rs 8 crore for quarter ended June 30, 2022. Over the years, the company has ventured into other businesses like debt capital market, portfolio management services, distribution, etc. to diversify its revenue streams. The company’s ability to improve its earnings profile will remain a monitorable.
Exposure to uncertainties inherent in the equity broking business: The revenue profile remains inherently volatile because of the high dependence on capital market-related activity such as broking income, which constitutes 48% of the total income. While the company has diversified its sources of revenue, the dependence on capital market-related activity remains high. Given the cyclical nature of these businesses, brokerage volumes and earnings are highly dependent on the level of trading in the capital markets. Thus, any downturn in the capital market business can have an adverse impact on profitability. |
Liquidity: Strong Liquidity is strong due to the agency nature of business. ABML had Rs 1197 crore cash and liquid investments and Rs 150 crore unutilized bank lines as on June 30, 2023. The borrowings are primarily in the form of commercial paper, with outstanding of Rs 900 crore as on same date. Additionally, the liquidity position is supported by the parentage of ABCL. |
Rating Sensitivity factors Downwards factors:
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About the Company ABML is present in equity broking, commodity broking, depository services, PMS (portfolio management services) and distribution of products like mutual funds, insurance and loans of Aditya Birla group companies. The Chennai-based company has centralised back-office operations. ABCL, the holding company for the financial services business of the Aditya Birla Group, owns a 73.7% stake in ABML. ABML is listed on Bombay Stock Exchange and National Stock Exchange. As on June 30, 2023, the company had 56 branches and 1156 franchisees across India. The company had around 65,938 active customers on National Stock Exchange (NSE) as on June 30, 2023 (active client market share of around 0.2%).
For fiscal 2023, ABML reported a net profit of Rs 33.9 crore on total income of Rs 278.8 crore, against Rs 26.1 crore and Rs 233.9 crore, respectively, for previous fiscal. For the quarter ended June 30, 2023, it reported a net profit of Rs 9.4 crore on total income of Rs 79.4 crore, against Rs 8.1 crore and Rs 66.9 crore, respectively, for the corresponding period previous fiscal. |
Key Financial Indicators
*as per CRISIL’s calculation |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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