| Batlivala and Karani Securities India Private Limited | ||||
| Rating Reaffirmed | ||||
| 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 A3+’
The rating continues to reflect B&K's adequate capitalisation, 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.
The overall performance of the company improved considerably during fiscal 2021 on the back of performance shown by capital markets in India. The story continued during first quarter fiscal 2022 wherein the 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 2021 was supported by higher traded turnover due to increase in institutional participation resulting in higher accretions. On earning profile, total income grew by ~19% y-o-y to Rs 95 crore during fiscal 2021 of which core broking income accounted for 91%. On the cost front, the company also managed to maintain its cost to income ratio at 80% for fiscal 2021 (98% for fiscal 2020). On an absolute basis too, the overall operating expense (including employee costs) stood at Rs 74 crore for fiscal 2021 as against Rs 77 crore for fiscal 2020. 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 15 crore in fiscal 2021 as against Rs 0.81 crore in fiscal 2020. CRISIL ratings overall believes that B&K will continue to benefit with positive market sentiments and uptick in capital markets. Nevertheless, given inherent volatile nature of capital markets, company’s ability to maintain its profitability while managing its costs will be monitored closely. |
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:
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.
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 45 crore as on March 31, 2021, 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 March 31, 2021. 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.
Weaknesses:
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 19.1% 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 21 as compared with 98% in fiscal 2020. 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.
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 2021. 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 March 31, 2021 |
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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 14.5 | Axis Bank Limited | CRISIL A3+ |
| Proposed Short Term Bank Loan Facility | 2.5 | Not Applicable | CRISIL A3+ |
| Short Term Bank Facility | 20 | Axis Bank Limited | CRISIL A3+ |
This Annexure has been updated on 22-Dec-2022 in line with the lender-wise facility details as on 20-Jul-2022 received from the rated entity.
Criteria Details
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