| Credit Suisse Finance India Private Limited | ||||
| Long-term rating removed from ‘Watch Developing’; Short-term 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 removed its ratings on the debt instruments of Credit Suisse Finance India Private Limited (CSFIL) from ‘Rating Watch with Developing Implications’ and assigned a ‘Stable’ outlook while reaffirming the long-term rating at ‘CRISIL AAA’ and short-term rating at ‘CRISIL A1+’
The ratings on the debt instruments of CSFIL factors in the support from its new parent, UBS AG. S&P Global Ratings (S&P Global) has counterparty credit rating of ‘A+/Stable/A-1’ on UBS AG.
On March 29, 2023, CRISIL Ratings had placed the ratings of CSFIL on ‘Watch with Developing Implications’ following Credit Suisse AG’s announcement dated March 19, 2023, of its merger agreement with UBS Group AG. Further, CRISIL Ratings had taken note of UBS Group AG, closing the acquisition of Credit Suisse Group AG and its subsidiaries on June 12, 2023, with all Credit Suisse's Group AG's assets, liabilities, and contracts merged into UBS Group AG. Credit Suisse AG is expected to conduct its business in the ordinary course and implement its restructuring measures in collaboration with UBS group, till the acquisition is consummated.
CRISIL Ratings has continued to monitor the impact of this development with focus on CSFIL’s positioning in the UBS group structure and its business and financial synergies with the merged entity.
CRISIL Ratings has now resolved the rating watch. The 'Stable’ outlook on the long-term rating reflects the clarity received on the strategic importance of CSFIL to UBS AG, its new parent, and expectation of support from them. UBS’s core business model is wealth management, and India is viewed as an important hub in Asia for this business.
On August 31, 2023, UBS Group AG announced its results for second-quarter 2023, including Credit Suisse's operations in the consolidated reporting for the first time, and disclosed details of the group's restructuring. Consequently, S&P Global revised its ratings on Credit Suisse AG and rated subsidiaries from ‘A/Watch Developing/A-1’ to A+/Stable/A-1’. Furthermore, S&P Global views the prospect of support to all Credit Suisse subsidiaries as higher and in line with that expected for UBS operating entities, even though there is no publicly committed timeline for the legal integration of smaller Credit Suisse entities into UBS entities.
The existing rating on CSFIL factors in expectation of close integration of India operations with UBS’s global operations, though timelines of integration are currently uncertain. Further, the rating also factors in the importance of CSFIL to its parent, UBS AG in the Asia market as part of its wealth management strategy in this region.
As on March 31, 2023, CSFIL’s networth stood at Rs 2,374 crore while gearing was nil. As on August 31, 2023, CSFIL had around Rs 750 crore of liquidity. |
Analytical Approach 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 entity.
CRISIL Ratings’ ratings on CSFIL’s debt instruments factor in strong support from the parentage of UBS AG (rated ‘A+/Stable/A-1’ by S&P Global). CSFIL is owned by Credit Suisse Investment Holdings (Mauritius) Ltd (CSIHML), which in turn is wholly owned by Credit Suisse AG, ultimately held by UBS Group AG.
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: Strategic importance of CSFIL to UBS group in line with expectation of support Amidst the reorganisation and restructuring by Credit Suisse AG in consultation with UBS Group AG, UBS has clearly articulated the strategic importance of India operations to the global business of UBS. It plans to leverage growth opportunities in the Indian market through Credit Suisse subsidiaries in India that are already well-established entities in this space.
S&P Global in its recent rationale has also indicated that it believes prospects of support to all Credit Suisse subsidiaries is higher now, and in line with UBS subsidiaries, even though there is no publicly committed timeline for the legal integration of smaller Credit Suisse entities into UBS entities. 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 UBS group. UBS group is expected to continue to provide capital support to CSFIL through Credit Suisse AG. Additionally, it is envisaged that the parent will ensure CSFIL meets all its financial obligations fully and on time.
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. These synergies with the new parent company, UBS AG, are expected to continue.
Comfortable capitalization CSFIL has a comfortable capital position. As on March 31, 2023, CSFIL has tier 1 capital adequacy ratio of 150.64% of risk-weighted assets, with networth of Rs 2,374 crore (Rs 2,268 crore a year earlier). The parent has infused around Rs 1,260 crore into CSFIL since July 2008. The company’s capitalisation should remain comfortable for the proposed scale of operations in India.
CSSIL reported profit after tax (PAT) of Rs 88 crore on total income of Rs 383 crore in fiscal 2023. Capitalisation is adequate, with networth of Rs 1,844 crore as on March 31, 2023 (Rs 1,754 crore a year earlier).
Weakness: Small scale of operations Compared to other capital-markets-related asset-financing companies, CSFIL’s operations are relatively small with a loan portfolio of Rs 1,983 crore as on March 31, 2023 (Rs 2,003 crore a year earlier). However, CSSIL houses the group’s institutional equities division, which began operations early 2007 and now ranks among the leading foreign brokerage houses in India. |
Liquidity: Superior CSFIL had around Rs 750 crore of liquidity (placed as cash and fixed deposits) as on August 31, 2023. Additionally, the company has unutilised bank lines of Rs 351 crore from Credit Suisse AG- India operations and Rs 50 crore from Citibank as on September 6, 2023. |
Outlook: Stable CRISIL Ratings believes CSFIL will be strategically important to UBS group and is expected to provide strategic, financial, and management support over the medium term. CSFIL is also likely to maintain a healthy financial risk profile. |
Rating Sensitivity Factors Downward Factors
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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 acquisition. Target business segments include promoter financing, acquisition financing, loans against shares, margin financing. Loan portfolio was Rs 1,983 crore as on March 31, 2023 (Rs 2,003 crore a year earlier).
CSSIL is into institutional broking and is a registered merchant banker and portfolio manager. It reported PAT of Rs 88 crore on total income of Rs 383 crore in fiscal 2023. Capitalisation is adequate, with networth of Rs 1,844 crore as on March 31, 2023, (Rs 1,754 crore a year earlier). |
Key Financial Indicators
1As per CRISIL Ratings calculations |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^Yet to be issued |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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