| Aditya Birla Money Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
| ||
| 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 commercial paper programme of Aditya Birla Money Limited (ABML).
The rating on ABML reflects the benefit that ABML is expected to derive from its parent, Aditya Birla Capital Ltd (ABCL rated ‘CRISIL AAA/Stable/CRISIL A1+). This strength is partially offset by modest earnings profile and exposure to uncertainty inherent in the equity broking business. |
Analytical Approach The rating factors in the strong support ABML receives from its parent ABCL. This is because ABML is a strategically important subsidiary of ABCL, with extensive business and operational linkages, and common brand. |
Key Rating Drivers & Detailed Description Strengths: Benefits that ABML is expected to derive from its parent, ABCL: The rating factors in the company’s strategic importance to, and expectation of strong support from, its parent, ABCL. CRISIL believes that ABML, being the group’s broking and distribution arm, is an important subsidiary of ABCL, as it complements the group’s product offerings by providing a capital market platform. Furthermore, financial services are expected to remain one of the key focus areas for the group. The significant holding (73.5% as on March 31, 2024) and shared brand name imply a strong moral obligation on ABCL to support ABML, both on an ongoing basis and in the event of any distress.
Weakness: Modest earnings profile Earnings profile remains modest even as the company has been reporting profits since 2015. For fiscal 2024, ABML recorded profit of Rs 53 crore on total income of Rs 395 crore, vis-à-vis profit of Rs 34 crore on total income of Rs 279 crore in fiscal 2023. For the three months ended June 30, 2024, the company reported profit of Rs 16 crore, compared with Rs 9.4 crore for the corresponding period of the previous fiscal. Over the years, the company has ventured into other businesses such as debt capital market, portfolio management services (PMS) and distribution to diversify its revenue streams. Accordingly, the revenue sources are now well-diversified, encompassing retail and institutional broking, fair value gains from wholesale debt market and PMS. However, the company’s ability to improve its earnings profile will remain monitorable.
Exposure to uncertainties inherent in the equity broking business The revenue profile remains inherently volatile because of high dependence on capital markets-related activities such as broking income, which constitutes 49% of the total income. While the company has diversified its sources of revenue, the dependence on capital market-related activities remains high. Given the cyclical nature of these businesses, brokerage volumes and earnings are highly dependent on the level of trading in the capital markets. Thus, any downturn in the capital market business can have an adverse impact on profitability. |
Liquidity: Strong Liquidity is strong due to the agency nature of business. ABML had cash and liquid investments of Rs 1,440 crore and unutilised bank lines of Rs 491 crore as on June 30, 2024. The borrowings are primarily in the form of commercial paper, outstanding at Rs 1,305 crore as on the same date. The liquidity is also supported by the parentage of ABCL. |
Rating Sensitivity Factors Downward factors
|
About the Company ABML is present in equity broking, commodity broking, depository services, PMS (portfolio management services) and distribution of products like mutual funds, insurance and loans of the Aditya Birla group companies. Based in Chennai, the company has centralised back-office operations. ABCL, the holding company for the financial services business of the Aditya Birla group, owns 73.5% stake in the company. ABML is listed on the Bombay Stock Exchange and the National Stock Exchange (NSE). As on June 30, 2024, the company had 50 branches and 1,200 franchisees across India. It had around 74,942 active customers on NSE as on December 31, 2023 (active client market share of around 0.2%).
For fiscal 2024, ABML reported net profit of Rs 52.9 crore on total income of Rs 395 crore, against Rs 33.9 crore and Rs 278.8 crore, respectively, for fiscal 2023. For the three-month period ended June 30, 2024, it reported a net profit of Rs 16.45 crore on total income of Rs 119.7 crore, against Rs 9.4 crore and Rs 79.4 crore, respectively, for the corresponding period previous fiscal. |
Key Financial Indicators
*includes preference shares in networth
|
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
|