| Hsbc Investdirect Financial Services India 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 'CRISIL A1+' rating on the Rs 1000 crore commercial paper (CP) programme of Hsbc Investdirect Financial Services India Limited (HIFSL).
The rating on HIFSL centrally factors in CRISIL Ratings expectation of continued support from ultimate parent, HSBC Holdings Plc (rated ‘A-/Stable/A-2’ by S&P Global). It also factors in strong capital position, evidenced by networth and gearing of Rs 509 crore and 1.3 time, respectively, as on December 31, 2022 (Rs 492 crore and 0.9 time, respectively, as on March 31, 2022). These rating strengths are partially offset by the modest scale of lending operations and high concentration in loan portfolio as top 20 borrowers accounted for more than 65% of the total advances as on December 31, 2022. |
Analytical Approach CRISIL Ratings rating on HIFSL is centrally based on S&P’s issuer credit rating on HSBC Holdings Plc. HSBC Holdings Plc holds a 100% stake in HIFSL, through its indirect subsidiaries. CRISIL Ratings believes that the 100% ownership, shared name and close operational linkages imply a strong moral obligation on the HSBC group (HSBC Holdings Plc and its subsidiaries) to support HIFSL. |
Key Rating Drivers & Detailed Description Strengths:
The rating continues to be based on S&P Global's long-term issuer credit rating of 'A-/Stable/A-2' assigned to HSBC Holdings Plc. HIFSL was acquired in 2008 by HSBC Holdings Plc through its indirect subsidiaries and currently holds 100% stake in the company. The holding structure is likely to remain unchanged over the medium term, with HSBC Holdings Plc continuing to be the majority shareholder. High net worth and mass affluent customers comprise an important target segment for HSBC group globally. India as an emerging economy, forms an important business centre for the group. HIFSL’s services complement those of the HSBC group in India to this segment. It remains the flagship company for loans against security (LAS) in India.
Furthermore, HIFSL benefits from continued strong management, branding, funding, and operational linkages with the group. Its risk management policies, systems, and processes are also in line with the policies followed by the group globally. Further, HIFSL has access to a line of credit of Rs 200 crores (Rs 162 crores has been availed as on 31st Dec 2022) from the Indian parent HSBC InvestDirect (India) Private Ltd (HIDL). Moreover, HSBC Holdings Plc has through its indirect subsidiaries infused equity capital in HIFSL in the past and is likely to do so to support HIFSL’s growth plans.
Close operational linkages, 100% ownership, and a shared name imply a strong moral obligation on HSBC Holdings Plc to continue supporting HIFSL, both on an ongoing basis and in case of distress.
In relation to the size and scale of its business, HIFSL remains well-capitalised. Networth and gearing of Rs 509 crore and 1.3 times, respectively, were reported as on December 31, 2022. Capitalisation is supported by the parent as HIFSL is 100% held by the holding company, HIDL, which in turn is 100% owned by HSBC Holdings Plc through its indirect subsidiaries. On a steady state basis, adjusted gearing is expected to remain below 3-4 times. However, given the company’s exposure to capital markets which are marked by inherent volatility, any weakening in asset quality, leading to erosion of networth, will be a key monitorable.
Weaknesses:
Operations continue to remain modest, as reflected in a loan book of Rs 1102 crore (including interest accrued) as on December 31, 2022, a growth of 38% (annualised) over Rs 858 crore (includes interest accrued) as on March 31, 2022. HIFSL is present in only one line of business i.e. lending against shares, mutual funds etc., and therefore, growth for the company is highly linked to various domestic as well as global economic events. In fiscal 2022, the company had registered a growth of 43.8% to touch Rs 858 crores of loan book as on March 31, 2022. The company is focusing on growing its portfolio and as a step towards the same, in fiscal 2023 the company has also opened its office in Bangalore to cater to lager customer base. However, given the nature of the business, the ability to successfully scale up business during various economic cycles, while managing asset quality and profitability will remain a key monitorable.
HIFSL has strong risk management policies, which are in line with those followed globally by the HSBC group. However, the loan book is concentrated as top 20 borrowers constituted more than 65% of total advances as on December 31, 2022. Nevertheless, the company has strong credit underwriting and risk management practices. Even though the company is catering to HSBC Bank India customers, it is still conservative in its customer selection criteria. It observes an internal due diligence process before on boarding new customers and renewing limits for existing customers. Also, it accepts collateral only for a select list of eligible securities. The eligibility criteria is reviewed periodically. Consequently, HIFSL has had nil delinquencies so far.
However, given the concentrated nature of the portfolio, HIFSL’s ability to maintain asset quality even during economic downturns will remain a monitorable. |
Liquidity: Superior The asset-liability maturity profile is comfortable with no cumulative mismatches across all the buckets as on December 31, 2022 (including line of credit committed by other institutions in inflows). As on February 28, 2023, the company had total debt obligations of Rs 297 crores (including interest outflow on borrowings) over the next two months (From March 2023 to April 2023). Against this, as on same date, it had Rs 353 crores of liquidity. The company has recently been sanctioned a Rs. 200 crores, which will be used in case of any exigency. Furthermore, CRISIL Ratings expects the company to receive need-based support from its parent, HSBC Holdings Plc and its subsidiaries. |
Rating Sensitivity factors Downward factors
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About the Company HIFSL was originally incorporated as Tajir Investment & Properties Limited on February 19, 1996. On August 8, 2007 pursuant to receipt of approval from Registrar of companies, the name of the company was changed to Investmart Financial Services Limited. Subsequently on receipt of approval from Registrar of companies on June 5, 2013, the name of the company was changed to HSBC InvestDirect Financial Services (India) Limited. The company is a wholly owned subsidiary of HSBC InvestDirect (India) Private Limited which is 100% owned by HSBC Holdings Plc through its indirect subsidiaries. HSBC InvestDirect (India) Private Limited was acquired by HSBC Violet Investment (Mauritius) Limited and HSBC Securities and Capital Markets (India) Private Limited in 2009 from IL & FS Investmart Ltd.
For 9 months ended fiscal 2023, the company reported a profit after tax and total income of Rs 17.4 crore and Rs 58 crore, respectively, as against a profit after tax of Rs 19.4 crore and a total income of Rs 45.0 crore, for fiscal 2022. |
Key Financial Indicators
Note: All financial information as on December 31, 2022 are as per unaudited financials Note: Above numbers are CRISIL Ratings adjusted numbers |
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. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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