| Mirae Asset Capital Markets (India) Private Limited | ||
| 'CCR AA/Stable' assigned to Corporate Credit Rating | ||
| 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 assigned its ‘CCR AA/Stable’ rating to the corporate credit facility of Mirae Asset Capital Markets (India) Private Limited (MACM).
The rating centrally factors in MACM’s strategic importance to its ultimate parent, Mirae Asset Securities Co. Ltd (MAS; rated 'BBB/Stable/A-2' by S&P Global Ratings [S&P]), as well as the strong moral obligation of MAS to support the Indian subsidiary, both on an ongoing basis and in case of distress. The rating also factors in MACM’s healthy capitalisation for the current and planned scale of operations, and experienced management team. These strengths are partially offset by the small scale of operations, intense competition in its business segments and exposure to risks inherent in capital market businesses.
MACM was established on October 06, 2017 and is engaged in the business of broking (institutional and retail), margin funding, distribution of financial products, merchant banking and advisory services. MACM started with an initial capital of US$300 million, a large part of which has currently been invested in debt and equity instruments. This will support the growth of the company’s business over the medium term.
The company has been profitable since fiscal 2019, further supporting the capital position. Furthermore, all business segments have senior management teams at the helm and benefit from continued support from MAS.
Nevertheless, the scale of business is small compared to its peers in every business segment. It is also susceptible to volatility inherent in capital market businesses. Profitable scale up of the businesses and performance during an adverse capital market cycle will be key monitorables. |
Analytical Approach For arriving at the credit assessment, CRISIL Ratings has considered the standalone credit risk profile of MACM and has also factored in the expectation of strong support from its ultimate parent, MAS. |
Key Rating Drivers & Detailed Description Strengths:
MAS sees India as an important market as part of its overseas expansion strategy. To support business growth in Asia, MAS has injected capital of Rs 2,000 crore through its Hong Kong subsidiary to set up MACM in 2017 with a view to build a diversified financial services business in India.
MACM’s rating centrally factors in the expectation of strong financial, operational and managerial support from MAS. The parent has appointed two representatives on the board of MACM, Mr Jisang Yoo (Chief Executive Officer) and Mr Sungkyu Kim (Chief financial Officer). The company has sound risk management policies, systems and processes which are adopted from its parent. CRISIL Ratings also believes the Indian business will receive capital support when required, including in the event of distress from MAS.
The ownership, shared brand and strong operational integration is expected to lead to strong support from MAS. Therefore, the extent of ownership and support extended by the parent remains a key rating sensitivity factor.
Capitalisation remains strong, as reflected in reported networth of Rs 2,381 crore as on March 31, 2022 (Rs 2,210 crore as on March 31, 2021).
MAS injected Rs 2,000 crore of capital into MACM, through its Hong Kong subsidiary, at inception. These funds were primarily deployed in the proprietary trading business and for placing margin at the stock exchanges. With scale up of the broking business and margin trading book, the company will reallocate its capital from the proprietary trading business towards these segments.
Networth remains comfortable for the current and proposed scale of operations and will continue to lend stability to operations, even amid volatile phases in the capital market.
MACM has a seasoned senior management team with significant experience in their respective segments. Mr Jisang Yoo, Chief Executive Officer of MACM has over two decades of experiences in financial fields; capital markets, asset management, investment banking, wealth management, brokerage. He previously was the CEO of Mirae Asset Mutual Fund in India, Mirae Asset Wealth Management as well as Global Investments in Brazil, and the managing director of Mirae Asset Global Investments in USA. Mr Sungkyu Kim, Chief Financial Officer, has a decade of experience across finance, investments, business strategy and financial control and audit. He worked at the Global Business Strategy Division at Mirae Asset Securities in Korea. He was also the fund/asset manager at Mirae Asset Global Investments. Furthermore, all business segment heads also come with decades of industry experience in their respective businesses.
CRISIL Ratings believes the rich experience of the management will stand MACM in good stead as it scales up its business.
Weaknesses:
MACM commenced its operations in 2018. It has gradually set up presence across corporate finance advisory, private credit, equity capital market and institutional equities and research. However, the scale of its businesses is small compared with its peers in these segments.
In the institutional equities segment, the company has empanelment with both domestic and overseas clients and is supported by an experienced research team. MACM, till recently, was present only in the cash segment but it entered the futures and options (F&O) segment in June 2022.
MACM has recently entered discount brokerage through its digital platform. The company mainly offers products and services through an online platform and mobile application, “M-stock”. Backed by its zero cost brokerage policy, the company has garnered a good customer base within months of starting operations in the fragmented domestic securities industry, even as it remains a new player.
Given that the current scale of operations is modest, profitable scale-up remains to be seen.
The company is in the nascent stage of operations, with bulk of its capital deployed in its proprietary trading book in both equity and fixed income segments. Proprietary trading is done on regular basis within well-established risk contours and in collaboration with research from the AMC business.
Nevertheless, the overall business (institutional equities, corporate advisory, ECM and private credit) remains susceptible to economic, political and social factors which drive corporate and investor sentiments. The company's brokerage volumes and deal flows are susceptible to the vagaries of the capital market.
MACM faces intense competition from multiple players offering low-cost products. The industry has seen a huge transformation in the last three years, with the entry of technology-based discount brokers, who are dominating market share.
The company has been profitable since fiscal 2019 and the internal accrual has been supporting the capital position. Profitable scale up of the businesses and performance during capital market cycles will be a key monitorable. |
Liquidity: Strong The liquidity position of MACM is strong due to the agency nature of the business and nil borrowings. The company is in the capital markets business, and thus, the overall borrowing requirements for the company will be primarily for the margin funding business. The company had liquidity in form of cash and bank balance and liquid investments of Rs 457 crore as on September 30, 2022. |
Outlook: Stable CRISIL Ratings believes MACM will receive strong support from MAS given the strategic importance and moral obligation to extend support, and that the company’s capital levels will remain healthy. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MACM was established on October 06, 2017 and is a wholly owned subsidiary of the Hong Kong-based Mirae Asset Securities (HK) Ltd, ultimately owned by Mirae Asset Securities Ltd.
The company provides diversified and well-integrated financial services and is engaged in the business of investment banking, investments, advisory services, proprietary trading and brokerage.
In fiscal 2022, MACM reported profit after tax (PAT) of Rs 171 crore on total income of Rs 299 crore, compared with PAT of Rs 125 crore on total income of Rs 227 crore in fiscal 2021. |
About the Group About Mirae Asset Securities Co Ltd MAS is the largest investment banking and stock brokerage company by market capitalization in South Korea. It is a financial services company that provides brokerage services, investment banking, wealth management, IPO, underwriting and various consulting services. MAS was merged with Daewoo Securities at the end of December 2016. It has a strong market presence in stock brokerage and sales of financial products.
In fiscal 2021, MAS reported PAT of KWR 1,183.4 billion on total income of KWR 11.7 trillion compared with PAT of KWR 834.3 billion on total income of KWR 15.7 trillion for the previous fiscal. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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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