Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A+/Stable’ rating on the non-convertible debentures of Avendus Capital Private Limited (ACPL).

 

The ratings continue to reflect the strong track record of the Avendus group in investment banking, healthy capitalisation, and a conservative gearing policy. Strong domain knowledge, and relationships across mid-market corporates benefit the group in the investment banking space. Furthermore, the group has diversified into institutional equities, wealth management, credit solutions and asset management, which should strengthen their earnings profile over the medium term. These strengths are partially offset by moderate profitability due to susceptibility to characteristic volatility in the capital-market-related businesses, and inherent vulnerability associated with the wholesale financing segment

Analytical Approach

Crisil Ratings has assessed the consolidated business and financial risk profiles of ACPL and its subsidiaries, including Avendus Finance Pvt Ltd (AFPL), given their integrated manner of operations, shared brand, common promoters, and shared management pool.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong track record of the Avendus group in investment banking and diversification into synergistic segments: The group is recognised among the top players in the investment banking domain, given its ability to execute complex transactions; which is also reflected in the increasing average fee per deal. The promoters have demonstrated their expertise in several sectors such as digital & technology, enterprise tech solutions, consumer, financial institutions, healthcare, industrial and infrastructure by successfully executing several investment banking transactions, especially in the merger and acquisitions, advisory and private equity syndication space for over a decade. Within the IB space, the Avendus group has a strong market position in the digital and technology (D&T) domain. However, the non-D&T segment has also been gaining momentum. This resulted in the group forging strong relationships with several corporates in the mid-market space. The group offers an expanded suite of products, which are synergistic to the offerings for their clients under the ‘One Avendus’ theme. The group also forayed into the equity capital market advisory space in 2023. The structured credit solutions segment complements its existing bouquet of services in the investment banking space, which includes  structured financing as well as private credit investment under alternate investment funds Category II. The group has also been establishing its position in the wealth management and asset management businesses. To augment its offerings further, the group acquired the institutional equities business of Spark Capital Advisors (India) Pvt Ltd in December 2022.

 

The group has experienced leaders heading the non-investment banking businesses as well. Leveraging existing relationships in the mid-corporate space is likely to create opportunities for the financing and wealth management businesses.

 

• Comfortable capital position and conservative gearing policy: With consolidated networth of Rs 1,850 crore as on December 31, 2024 (on a provisional basis), the group is adequately positioned to support the growth of its businesses over the medium term. Most of the capital requirement will be in the lending business housed in AFPL as other businesses, including investment banking, are fee-based. The gearing policy is conservative, and the management intends to keep gearing below 3 times for the lending business (AFPL) over the medium term on a steady-state basis (0.7 time as on December 31, 2024). Gearing is expected to remain below 1.5 times at group level over the medium term on a steady-state basis (0.4 times as on December 31, 2024).

 

AFPL, being the lending arm of the group, also has comfortable capitalisation with the standalone reported networth of Rs 905 crore and capital adequacy of 53.08% as on December 31, 2024.

 

Weaknesses:

• Moderate earnings due to susceptibility to cyclicality in capital-market-related businesses: The group's capital market businesses remain susceptible to economic, political and social factors that drive corporate and investor sentiments. While the group reported strong performance in investment banking in fiscals 2022 and 2023, it was impacted in fiscal 2024 with extended deal completion timelines. There was some revival in fiscal 2025 with the nine-month revenue from IB surpassing the full fiscal 2024 revenue. ACPL, on a consolidated basis, reported a net profit of Rs 170 crore in the nine months ended fiscal 2025 (Rs 118 crore in fiscal 2024 and Rs 138 crore in fiscal 2023). Return on average networth for fiscal 2021 and the nine months of fiscal 2025 was at an average of ~10%, while the average cost to income ratio for the same period was around 77%.

 

The ongoing diversification in business should support profitability over the medium term. In the nine months of fiscal 2025, investment banking contributed ~53%, credit solutions (structured credit and syndication) ~28%, institutional equities ~21%, wealth ~12% of operating PBT, while the asset management business was incurring loss. This is against 84% of PBT from investment banking in fiscal 2023. The acquisition of Spark has supported the profitability, along with augmenting the equity capital markets (ECM) offering, thus widening available solutions for their customers. The credit solutions business through the alternate investment fund (AIF) route is also expanding. The wealth management and asset management businesses are in a relatively nascent stage. Ability to scale up the non-IB businesses will be key to strengthening and diversifying profitability.

 

Nevertheless, the group has been diversifying its operations on the investment banking side as well. Traditionally, deal profile was dominated by the D&T domain. However, over the last couple of years, the non-D&T domains have also seen growth.

 

• Inherent vulnerability associated with the wholesale financing segment: AFPL commenced lending operations in fiscal 2017 in the wholesale financing segment and had outstanding loans of Structured finance is around Rs 1,008 crore as on December 31, 2024 (Rs 986 crore as on March 31, 2024). AFPL also provides loan against securities for mid-market corporate and individual clients of the Avendus group with a loan book of Rs 364  crore as on December 31, 2024 (Rs 309 crore as on March 31, 2024). Overall, the loan book growth is typically low due to high prepayments coupled with a cautious approach adopted by the management. Strong relationships of the promoters and their understanding of business dynamics of mid-corporates support the lending business. However, given the chunkiness of the exposures, asset quality remains vulnerable to shocks in case of slippages. The gross non-performing assets (GNPA) ratio rose to 6.3% as on March 31, 2023, on account of one exposure (amounting to Rs 83.4 crore) slipping to NPA. The account was written off later in fiscal 2024.

 

As a result, GNPAs were nil as on December 31, 2024. Overall, the ability to manage asset quality, maintain healthy collections, and scale up the lending business profitably remains monitorable.

Liquidity: Strong

Unencumbered cash and bank balance, mutual funds, liquid investments and fixed deposits amounted to Rs 1,101 crore as on January 31, 2025, against debt repayments aggregating Rs 296 crore up to June 2025. Liquidity is sufficient in view of the current scale of operations and diversified revenue streams (fee-based businesses contribute to most of the revenue).

Outlook: Stable

The Avendus group will continue to maintain a healthy capital position and conservative gearing policy, which will offset the limited track record of the group in the lending business.

Rating sensitivity factors

Upward factors

• Significant improvement in market position across businesses
• Diversification in earnings profile leading to greater stability in profitability

 

Downward factors

• Material weakening of profitability with rise in cost-income ratio
• Significant increase in leverage levels (beyond 3 times) on a sustained basis

About the Avendus group

ACPL was founded in 1999 by Mr Ranu Vohra, Mr Kaushal Aggarwal and Mr Gaurav Deepak. The company operates in the financial services space through its subsidiaries in the areas of financial advisory, capital markets, wholesale financing, wealth management and alternative asset management. The acquisition of Spark also led to addition of institutional equities to the offerings.

  

ACPL (consolidated) had total income of Rs 1,035 crore and net profit of Rs 170 crore for the nine months ended fiscal 2025, against Rs 1,012 crore and Rs 118 crore, respectively, in fiscal 2024.

 

AFPL is a wholly owned subsidiary of ACPL, and offers financing products such as promoter funding, corporate finance, customised structured debt solutions, and acquisition finance. The company had outstanding loans of about Rs 1,372 crore as on December 31, 2024 (Rs 1,295 crore as on March 31, 2024).

Key Financial Indicators :  (ACPL – consolidated)

As on / For the period		December 31, 2024/  9MFY2025*	March 31, 2024 / FY2024	March 31, 2023 / FY2023
Total assets	Rs crore	3233	2926	3040
Total income	Rs crore	1035	1012	1053
PAT	Rs crore	170	118	138
Gearing	Times	0.4	0.4	0.5
Return on average networth	%	12.9^	7.3	9.5

^annualised

*Unaudited and provisional

Any other information: Not Applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Avendus Capital Pvt Ltd*	Full	Parent
Avendus Finance Pvt Ltd*	Full	Subsidiary

*AFPL is a 100% subsidiary of ACPL