Rating Rationale
December 12, 2022 | Mumbai
Goldman Sachs India Securities Private Limited
Rating Reaffirmed
 
Rating Action
Rs.2000 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 reaffirmed its 'CRISIL A1+' rating on the Rs 2000 crore commercial paper programme of Goldman Sachs (India) Securities Private Limited (GSISPL).

 

The rating continues to reflect the support that GSISPL is expected to receive from its ultimate parent, The Goldman Sachs Group, Inc. (Goldman Sachs; rated 'BBB+/Stable/A-2' by S&P Global), given GSISPL's strategic importance to, 100% ownership by, and close operational linkages and shared brand name with Goldman Sachs. The rating also reflects comfortable capitalisation of GSISPL and its strong presence in institutional broking and investment banking space. These strengths are partially offset by exposure to risks inherent in capital market related businesses and the consequent volatility in earnings.

Analytical Approach

For arriving at the rating, CRISIL Ratings has assessed the standalone credit risk profile of GSISPL and continues to factor in strong managerial support from Goldman Sachs. GSISPL is wholly owned by GSIA Holdings (Singapore) Pte. Ltd., which is ultimately held by Goldman Sachs. CRISIL Ratings believes GSISPL will continue to benefit from strong parentage of Goldman Sachs, considering the strategic importance of the entity and ultimate shareholding, close operational linkages and shared name.

Key Rating Drivers & Detailed Description

Strengths:

Operational and financial support derived from the ultimate parent, Goldman Sachs

GSISPL continues to receive support from its ultimate parent Goldman Sachs and or its subsidiaries in terms of risk management, governance, and infrastructure. The company is closely integrated with Goldman Sachs and has enabled GSISPL to enjoy a healthy market position in key operating segments.  GSISPL's approach to risk management and its operational infrastructure are broadly consistent with that of its parent. CRISIL Ratings also believes the Indian business is strategically important to Goldman Sachs' global franchise and will receive capital support when desirable, including in the event of distress from Goldman Sachs.

 

Comfortable capitalisation

Capitalisation remains comfortable with Rs 2,220 crore of networth as on March 31, 2022, supported by steady accruals. The company derives a substantial amount of its revenue from fee-based businesses, such as investment banking, and broking. As these businesses do not require large capital, the networth is expected to remain comfortable for the company's current and planned scale of operations.

 

Strong presence in institutional broking and investment banking space

GSISPL is one of the leading players in the institutional broking segment. The ability to offer quality research, and strong execution capabilities give it an edge over competitors. The company has a healthy market share in the institutional broking segment supported by a large base of domestic and foreign clientele. It is a significant player in investment banking, especially in the equity and mergers and acquisitions (M&A) space. It also has significant strengths in the corporate advisory segments. GSISPL also benefits from Goldman Sachs's global franchise, particularly in advising large, cross-border M&A deals.

 

Weakness:

Exposure to risks inherent in capital market related businesses and consequent volatility in earnings

GSISPL's capital market businesses (investment banking and equity broking) remain susceptible to economic, political, and social factors that drive corporate and investor sentiments. Given the cyclical nature of the business, the company's brokerage volumes and earnings are highly dependent on the level of trading in the capital markets. This makes earnings and profitability potentially volatile.

Liquidity: Superior

Liquidity position of GSISPL is superior due to the agency nature of business and nil borrowings (excluding margin deposits from clients). GSISPL needs funds for meeting margin requirement at the bourses which is met by margin deposits from clients and company’s own funds. The company had liquidity in the form of cash and bank balances aggregating to Rs 2,312 crore as on September 30, 2022.

Rating Sensitivity Factors

Downward Factors:

  • More than 1 category downgrade in the rating of the parent entity by S&P.
  • Substantial and continuous weakening of earnings profile.

About the Company

GSISPL commenced active commercial operations in 2007 and is a wholly owned Indian subsidiary of GSIA Holdings (Singapore) Pte. Ltd., ultimately owned by Goldman Sachs. GSISPL offers broking and investment banking services in India. It commenced trading as a broker on the Bombay Stock Exchange (for stocks) and the National Stock Exchange for stocks, futures, and options in 2007, serving mainly institutional investors (Indian and foreign). The company is also authorized to participate in equity underwriting.

Key Financial Indicators

As on/for the period ended March 31

Unit

2022

2021

2020

Total assets

Rs crore

8852

6147

5512

Total income

Rs crore

948

772

889

Profit after tax

Rs crore

369

244

321

Adjusted gearing

Times

Nil

Nil

Nil

Return on average assets

%

4.9

4.2

5.7

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

Complexity levels

Issue Size
(Rs.Cr)

Rating assigned
with outlook

NA

Commercial Paper

NA

NA

7-365 days

Simple

2000

CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 2000.0 CRISIL A1+   -- 15-12-21 CRISIL A1+ 22-12-20 CRISIL A1+ 13-12-19 CRISIL A1+ CRISIL A1+
All amounts are in Rs.Cr.

  

Criteria Details
Links to related criteria
Rating Criteria for Securities Companies
Mapping global scale ratings onto CRISIL scale
CRISILs Criteria for rating short term debt

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