| Batlivala and Karani Securities India Private Limited | ||||
| Rated amount enhanced for Bank Debt | ||||
| 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 rating on the short-term bank loan facilities of Batlivala and Karani Securities India Private Limited (B&K) at ‘CRISIL A2’.
CRISIL Ratings had on January 25, 2023, upgraded its rating on the short-term bank loan facilities of B&K to ‘CRISIL A2’ from ‘CRISIL A3+’.
The ratings primarily factors-in the substantial improvement in B&K’s capital position backed by higher accrual during the last 2-2.5 years. B&K’s adjusted networth increased to Rs 98 crores as on December 31, 2022 (adjusted for inter-group investments, proprietary trading capital and equity investments) from Rs 44 crore as of March 31, 2021.This improvement in capital position was on account of steady internal accruals buoyed by improvement in overall performance of the company.
The overall performance of the company improved considerably during fiscal 2021 and 2022 on the back of performance shown by capital markets in India. The story continued during nine months of fiscal 2023 wherein the intuitional investors participation continued which led to growth in core broking revenues. B&K mainly caters to institutional investors which were fairly active during last 4-6 quarters. Overall financial performance in fiscal 2022 was supported by higher traded turnover due to increase in institutional participation resulting in higher accretions.
On earning profile, company’s total income grew by ~34% y-o-y to Rs 127 crore in fiscal 22 from Rs 95 crore during fiscal 2021 of which core broking income accounted for 82%. On the cost front, the company was able to reduce its cost to income ratio substantially to 62.3% during first half fiscal 2023 from around 80% in fiscal 2022 (average 90% between fiscal 2021- fiscal 2019). The benefits of improved top line and cost management was visible in net profitability; B&K’s profit after tax (PAT) improved substantially to Rs 30 crore in fiscal 2022 as against Rs 15 crore in fiscal 2021. For first nine months of fiscal 2023 the company has reported profit of around Rs 17 crore. CRISIL ratings believes that B&K will continue to benefit with improved cost to income over near to medium term. Nevertheless, given inherent volatile nature of capital markets and company’s higher dependence on FII/DII clients, its ability to maintain its profitability while managing its costs will be monitored closely.
Further, the ratings continue to reflect B&K’s conservative gearing policy, and promoters' extensive experience in the institutional broking segment. These rating strengths are partially offset by the company's modest market position and exposure to uncertainties inherent in the equity broking segment. |
Analytical Approach For arriving at the ratings of B&K, CRISIL Ratings has considered the standalone business and financial risk profile of B&K. |
Key Rating Drivers & Detailed Description Strengths: Promoter’s extensive experience in institutional broking segment B&K’s key promoter, Mr Manoj Murarka, has experience of more than two decades in the equity market and is known for his market intelligence. Mr Murarka has very good understanding of the equity markets and the institutional broking business. Mr Saahil Murarka (son of Mr Manoj Murarka) has also joined as one of key executive director. Mr Saahil currently handling all key operations of the company under supervision of Mr Manoj Murarka. He looks after the research division and group’s business operations. B&K’s research division is known for its presence in the mid cap segment. B&K will continue to benefit from its promoters’ extensive experience in the institutional broking business and maintain its strong relationships with large clients both in cash and F&O segments over the medium term.
Adequate Capitalisation and conservative gearing policy B&K is adequately capitalised for its current and planned scale of operations. The company’s adjusted networth (net of investments & loans in subsidiaries and group companies, 30% of unlisted shares and intangible assets) was Rs 83 crore as on Sep 30, 2022 (Rs 69.7 crore as on March 31, 2022), against Rs 32 crore as on March 31, 2020. B&K’s adequate capital position is supported by its conservative gearing policy, reflected in nil gearing of 0 times as on Sep 30, 2020. Gearing has been less than 0.2 times in the past 5 years. The gearing is expected to remain at similar level since the company does not have any plans in getting into any other capital-intensive business activities.
Weakness: Despite improvement, the earnings profile remains vulnerable to uncertainties inherent in the capital markets business B&K’s income is highly dependent on trading volumes, which are volatile, and is susceptible to uncertainties prevalent in the equity markets. During the fiscal 2021, earing profile is supported by strong growth in trading turnover, as a result the company has reported ROE of 29.74% and 19.1% for fiscal 22 and 2021, respectively as compared with 1.1% and 2.7% for fiscal 2020 and 2019, respectively. Further, cost to income ratio also improved to 80% in fiscal 22 as compared with four-year average of 90% through fiscal 22. The company operates on higher fixed operating cost model which might lead to high pressure on the profitability if the turnover declines from the current level. As a prudent measure the company has taken cost cutting initiatives by extending salary cuts hierarchy wise. The company’s earnings profile might be impacted in case of the slowdown in institutional equity turnover which is driven by market valuations and macro-economic factors. Further sharp correction in the market might lead to decline in the earnings of the company from the current level. CRISIL Ratings, therefore, believes, that B&K’s overall earning profile, therefore, remains susceptible to volatility in capital markets. It will continue to be modest driven by volatility on account of its high fixed cost model and due to market conditions.
Modest market position B & K continues to have modest market share in its main business of institutional equity broking with 0.2% in the cash market segment and 0.01% in the F&O segment during the fiscal 2022. The low market share is partly because B&K is engaged only in institutional broking and has limited F&O activity. B&K, nevertheless, enjoys good brand equity in the domestic market, given the quality of its research on mid-caps, its lineage, and continues to have a significant presence among domestic institutional clients such as insurance and mutual fund companies. |
Liquidity: Adequate The liquidity position of the company remains adequate. The company usually has no debts on its books. The company maintains unencumbered cash and bank balance of Rs 1-2 crore on a steady state basis. The company has no term loan borrowings. The borrowings of the company are mainly for trade guarantee and margin requirements at stock exchange. The company had nil borrowings outstanding as on Mar 31, 2023 |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company B&K, set up in 1998, has a presence in the institutional broking & MF distribution (around 90 per cent of revenues) and investment banking segments. The company is closely held and controlled by Mr. Manoj Murarka and has around 200 institutional clients. In 2005, B&K established seven subsidiaries, which are engaged in fee-based businesses, such as commodity broking, insurance broking, and wealth management services; however, their operations continue to be marginal. |
Key Financial Indicators
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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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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This Annexure has been updated on 02-June-23 in line with the lender-wise facility details as on 20-Jul-22 received from the rated entity.
Criteria Details
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