Rating Rationale
March 29, 2023 | Mumbai
Credit Suisse Finance India Private Limited
Long-term rating placed on 'Watch Developing'; short-term rating reaffirmed
 
Rating Action
Rs.50 Crore Non Convertible DebenturesCRISIL AAA/Watch Developing (Placed on 'Rating Watch with Developing Implications')
Rs.1200 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
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 placed its long-term rating of ‘CRISIL AAA’ on the Non-Convertible Debentures of Credit Suisse Finance India Pvt Ltd (CSFIL) on ‘Rating Watch with Developing Implications’. The rating on Commercial Paper has been reaffirmed at ‘CRISIL A1+’.

 

The rating action follows the parent Credit Suisse AG’s announcement dated March 19, 2023, of its merger agreement with UBS Group AG (UBS).  As per the terms of the deal, UBS will acquire the Credit Suisse AG group for CHF 3 billion. Until consummation of the deal, Credit Suisse AG will continue to conduct its business in the ordinary course and implement its restructuring measures in collaboration with UBS.

 

Subsequently, on March 20, 2023, S&P Global Ratings (S&P) has placed its long-term and short-term issuer credit ratings on Credit Suisse AG of ‘A-/A-2’ on Credit Watch Positive from ‘A-/Stable/A-2’. The rating action is driven by S&P’s view, that Credit Suisse's acquisition by the stronger UBS group could help to stabilise its franchise and its funding and liquidity, while strengthening its governance and risk management standards.

 

The existing ratings on the debt instruments of CSFIL factor in the expectation of support from Credit Suisse AG. Amidst the reorganisation and restructuring by Credit Suisse AG in consultation with UBS, the strategic importance of CSFIL to UBS, and the support stance towards CSFIL needs to be seen. Hence, the rating on the long-term debt instruments has been placed on ‘Watch with Developing Implications’; the watch will be resolved once greater clarity emerged on these aspects.

 

Nevertheless, the short-term rating has been reaffirmed as CRISIL Ratings believes that any changes will happen in an orderly manner. Further, CSFIL, on a standalone basis, has comfortable capitalisation and liquidity. CSFIL’s networth stood at Rs 2,335 crore and the company had nil gearing as on December 31, 2022. The company also cash and cash equivalents of Rs. 480 crore as on March 20, 2023 along with unutilised bank line of Rs 351 crore as against no debt repayments.

Analytical Approach

For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of CSFIL and Credit Suisse Securities (India) Pvt Ltd (CSSIL), which is into institutional broking and investment banking. CSFIL and CSSIL are together referred to as ‘the combine’. There are significant operational linkages between the companies in the Credit Suisse group.

 

CRISIL Rating’s ratings on CSFIL’s debt instruments factor in from the parentage of Credit Suisse AG (rated ‘A-/Watch Positive/A-2’ by S&P Global Ratings). CSFIL is owned by Credit Suisse Investment Holdings (Mauritius) Ltd (CSIHML), which in turn is wholly owned by Credit Suisse AG, the group’s main operating company. 

 

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:

Expectation of strong support from the parent

CSFIL was acquired by Credit Suisse AG in July 2008, and there has been no change in the holding structure since then. Credit Suisse AG is also the holding company for most of the international subsidiaries of the Credit Suisse group. Credit Suisse AG is expected to continue to provide capital support to CSFIL through CSIHML. Additionally, it is envisaged that the parent will ensure CSFIL meets all its financial obligations fully and on time.

 

CSFIL has been strategically important to Credit Suisse AG’s India operations given that it remains the flagship entity for the group’s lending and debt syndication activities in the country. CSFIL’s target business segments include promoter financing, acquisition financing, loans against shares, margin financing.

 

CSFIL has benefited from continued management, branding, funding and operational linkages with Credit Suisse AG’s India branch. CSFIL’s board has representation from Credit Suisse AG’s senior management in India, and the latter has been involved in strategic decision making. CSFIL’s risk management policies are in line with the risk management policies and processes of Credit Suisse AG’s India branch.

 

However, amidst the reorganisation and restructuring by Credit Suisse AG in consultation with UBS, CRISIL Ratings will monitor the impact of this announcement on CSFIL’s positioning in the UBS group structure post merger and its business and financial synergies with the merged entity.

 

Comfortable capitalisation

CSFIL has a comfortable capital position. As on December 31, 2022, CSFIL had a high Tier-I capital adequacy ratio of 111.66% of risk-weighted assets, with networth of Rs 2,335 crore (Rs 2,268 crore as on March 31, 2022). The parent has infused around Rs 1,260 crore into CSFIL since July 2008. CSFIL’s capitalisation should remain comfortable for the  proposed scale of operations in India.

 

CSFIL also has a conservative financial policy, with nil gearing as on December 31, 2022 (0.1 times as on March 31, 2022). Capitalisation of CSSIL is adequate, with networth of Rs 1834 crore as on December 31, 2022 (Rs 1,754 crore as on March 31, 2022).  

 

Weakness:

Small scale of operations:

Compared to other capital-market-related asset-financing companies, CSFIL’s operations are relatively small with a loan portfolio was Rs 1960 crore as on December 31, 2022 (Rs 2,003 crore as on March 31, 2022). However, CSSIL houses the group’s institutional equities division, which began operations in early 2007 and now ranks among the leading foreign brokerage houses in India.

Liquidity : Superior

Liquidity is comfortable with CSFIL having cash and cash equivalents of Rs. 480 crore as on March 20, 2023 along with bank unutilised line of Rs 351 crore as against no debt repayments

Rating Sensitivity factors

Downward factors

  • Reduction in expected parent support to CSFIL amidst the reorganisation and restructuring by Credit Suisse AG in consultation with UBS
  • Weakening in credit profile of ultimate holding company of CSFIL
  • Deteriorating asset quality resulting in pressure on profitability, and sustained losses

About the Company

CSFIL, formerly Bokadia Marketing and Finance Pvt Ltd, was acquired by Credit Suisse AG in July 2008. The parent has infused around Rs 1,260 crore in CSFIL since the acquisition. Target business segments include promoter financing, acquisition financing, loans against shares, margin financing. Loan portfolio was Rs 1,960 crore as on December 31, 2022 (Rs 2,003 crore as on March 31, 2022).

 

CSFIL reported profit after tax (PAT) of Rs 102 crore on a total income of Rs 178 crore in fiscal 2022 against PAT of Rs 102 crore on total income of Rs 153 crore in fiscal 2021. For first nine months ended December 31, 2022, CSFIL reported PAT of Rs 76 crore on a total income of Rs 134 crore.

 

CSSIL is into institutional broking and is a registered merchant banker and portfolio manager. It reported PAT of Rs 257 crore on total income of Rs 655 crore in fiscal 2022 against Rs 97 crore and Rs 435 crore, respectively, in fiscal 2021. For first nine months ended December 31, 2022, CSSIL reported PAT of Rs 80 crore on a total income of Rs 317 crore.

Key Financial Indicators : CSFIL

As on / for the year ended

 

December 31, 2022

March 31,2022

March 31,2021

Total assets

Rs crore

2357

2537

2241

Total income

Rs crore

124

178

153

Profit after tax

Rs crore

75

102

102

Gross NPA

%

NIL

NIL

NIL

Adjusted gearing

Times

0.00

0.11

0.03

Return on assets (annualised)

%

4.2

4.3

4.3

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs crore)

Complexity level

Rating outstanding

NA

Non-convertible debentures^

NA

NA

NA

50

Simple

CRISIL AAA/Watch developing

NA

Commercial paper programme

NA

NA

7-365 Days

1200

Simple

CRISIL A1+

^yet to be issued

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Credit Suisse Finance (India) Pvt Ltd

Full

Operational, financial and managerial linkages, along with shared brand

Credit Suisse Securities (India) Pvt Ltd

Full

Operational, financial and managerial linkages, along with shared brand
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 1200.0 CRISIL A1+   -- 10-11-22 CRISIL A1+ 07-10-21 CRISIL A1+ 21-07-20 CRISIL A1+ CRISIL A1+
      --   -- 11-08-22 CRISIL A1+ 01-04-21 CRISIL A1+ 29-05-20 CRISIL A1+ --
      --   -- 26-05-22 CRISIL A1+   --   -- --
Non Convertible Debentures LT 50.0 CRISIL AAA/Watch Developing   -- 10-11-22 CRISIL AAA/Stable 07-10-21 CRISIL AAA/Stable 21-07-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   -- 11-08-22 CRISIL AAA/Stable 01-04-21 CRISIL AAA/Stable 29-05-20 CRISIL AAA/Stable --
      --   -- 26-05-22 CRISIL AAA/Stable   --   -- --
All amounts are in Rs.Cr.

    

Criteria Details
Links to related criteria
Rating Criteria for Finance Companies
Mapping global scale ratings onto CRISIL scale
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Criteria for Consolidation

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