| Aditya Birla Money Limited | ||
| Rated amount enhanced for Commercial Paper | ||
| 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 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 A1+’). The strength is partially offset by the company’s modest earnings profile, and exposure to uncertainties inherent in the equity broking business. |
Analytical Approach The ratings reflect the strong support that ABML receives from its parent ABCL. This is because ABML is a strategically important subsidiary of ABCL, with extensive business and operational linkages, and a common brand. |
Key Rating Drivers & Detailed Description Strengths: Benefits that ABML is expected to derive from its parent, ABCL: The rating factors in ABML’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. Further, financial services is expected to remain one of the key focus areas for the group. The significant holding (73.5% as on December 31, 2023) 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 2023, ABML recorded a profit of Rs 34 crore on a total income of Rs 279 crore vis-à-vis profit of Rs 26 crore on a total income of Rs 234 crore in fiscal 2022. For the nine-month period ended December 31, 2023, it reported a profit of Rs 37 crore as compared to Rs 27 crore for the corresponding period in previous fiscal. Over the years, the company has ventured into other businesses like debt capital market, portfolio management services, distribution, etc. 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 portfolio management services. However, the company’s ability to improve its earnings profile will remain a monitorable.
Exposure to uncertainties inherent in the equity broking business: The revenue profile remains inherently volatile because of the high dependence on capital market-related activity such as broking income, which constitutes 48% of the total income. While the company has diversified its sources of revenue, the dependence on capital market-related activity 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 Rs 1236 crore cash and liquid investments and Rs 291 crore unutilized bank lines as on December 31, 2023. The borrowings are primarily in the form of commercial paper, with outstanding of Rs 1110 crore as on same date. Additionally, the liquidity position is supported by the parentage of ABCL. |
Rating Sensitivity Factors Downward Factors
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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 Aditya Birla group companies. The Chennai-based company has centralised back-office operations. ABCL, the holding company for the financial services business of the Aditya Birla Group, owns a 73.5% stake in ABML. ABML is listed on Bombay Stock Exchange and National Stock Exchange. As on December 31, 2023, the company had 58 branches and 887 franchisees across India. The company had around 74,942 active customers on National Stock Exchange (NSE) as on December 31, 2023 (active client market share of around 0.2%).
For fiscal 2023, ABML reported a net profit of Rs 33.9 crore on total income of Rs 278.8 crore, against Rs 26.1 crore and Rs 233.9 crore, respectively, for previous fiscal. For the nine-month period ended December 31, 2023, it reported a net profit of Rs 36.5 crore on total income of Rs 279.2 crore, against Rs 26.5 crore and Rs 208.6 crore, respectively, for the corresponding period previous fiscal. |
Key Financial Indicators
*as per CRISIL’s calculation #Excludes preference shares under networth. Including the same, Gearing stood at 4.0 times and 4.1 times respectively as on the same periods.
*as per CRISIL’s calculation #Excludes preference shares under networth. Including the same, Gearing stood at 4.6 times and 3.8 times respectively as on the same periods. |
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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