| Barclays Investments and Loans India Private 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 commercial paper programme of Barclays Investments and Loans India Private Limited (BILIPL).
The rating centrally factors in expectation of continued support from ultimate parent, Barclays PLC (rated 'BBB/Positive/A-2' by S&P). The rating also factors in BILIPL’s comfortable capitalisation and strong risk management systems. These strengths are partially offset by small scale of operations.
S&P's ratings on Barclays PLC reflect its leading market position in UK banking and global wholesale banking, diversified business model by business and geography along with robust capital, funding and liquidity position. These strengths are partially offset by potential earnings volatility from the large capital markets business, exposure to higher risk assets, including consumer credit and leveraged finance.
Furthermore, under the RBI’s Resolution Framework for COVID-19-related stress, the company has not invoked restructuring on any of its accounts as on September 30, 2022. CRISIL Ratings will continue to monitor the ability of the company to manage collections and asset quality in the current environment. |
Analytical Approach CRISIL Ratings's rating on the Indian affiliates of global financial institutions (GFIs) centrally factor in a strong expectation of support from their ultimate parents. The rating framework for such affiliates considers the following factors: CRISIL's assessment of the global operating environment and its impact on the credit risk profiles of GFIs; S&P Global's ratings on GFIs; CRISIL's translation of the S&P Global ratings on the parents into CRISIL's rating scale; and the standalone credit quality of the respective Indian operations |
Key Rating Drivers & Detailed Description Strengths: Expectation of strong support from ultimate parent, Barclays PLC BILIPL was acquired by Barclays PLC in 2006 and there has been no change in the holding structure for BILIPL since then. The holding structure is likely to remain unchanged over the medium term, with Barclays PLC continuing to be the majority shareholder. High and ultra-high net worth individuals comprise an important customer segment for the Barclays group globally. India as an emerging economy, forms an important business centre for the group. BILIPL’s services complement those of the Barclays group in India to this segment. It remains the flagship entity for loans against security (LAS) in India.
Furthermore, BILIPL 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. It also has funding lines from Barclays Bank, India branch. Moreover, Barclays PLC has regularly infused equity capital in BILIPL in the past, and is likely to do so to support BILIPL’s growth plans.
Close operational linkages, 100% ownership, and a shared name imply a strong moral obligation on Barclays PLC to continue supporting BILIPL, both on an ongoing basis and in case of distress.
Comfortable capitalisation Capital position is comfortable, with net worth of Rs 987 crore and capital adequacy ratio of 32.5% as on September 30, 2022. Gearing was at 2.6 times as on September 30, 2022. Capitalisation is supported by regular equity infusion by the parent, who has infused Rs 1,090 crore till date. Net worth is lower than the equity due to accumulated losses in the past. However, BILIPL has been profitable since the past five years, thus strengthening the capital position by internal accrual. Capitalisation should remain comfortable for the proposed scale of operations in India.
Strong risk management systems BILIPL has strong risk management policies, which are in line with those followed globally by the Barclays group. Given the nature of the business, the loan book is chunky. Nevertheless, given the strong credit underwriting and risk management practices, BILIPL has had nil delinquencies in its LAS book. However, given the chunky nature of the portfolio with top 20 borrowers forming around 56% as on September 30, 2022, BILIPL’s ability to maintain asset quality even during economic downturns will remain a monitorable.
Weakness: Small scale of operations Operations continue to remain small, as reflected in the loan book of Rs 2,722 crore as on September 30, 2022 (Rs 2727 crore as on March 31, 2022). Moreover, BLIPL is present in only one line of business, LAS, where growth is highly linked to various domestic as well as global economic events. Ability to successfully scale up business during various economic cycles, while managing asset quality and profitability will remain a key monitorable. |
Liquidity: Strong Liquidity is comfortable with liquidity cushion of Rs 1167 crore in the form of cash & cash equivalents and unutilised bank lines as on December 31, 2022 to honor upcoming debt obligations of Rs 920 crore over the next two months (upto February 2023). Notably, the borrowings (which primarily comprised commercial papers) are mainly deployed for loans against security (LAS) to wealth customers of Barclays Bank and therefore the book is quite liquid and same can be liquidated if need arises. Also, there is strong expectation of support from parent company (Barclays PLC) to BILIPL which enhances comfort on liquidity. |
Rating Sensitivity Factors Downward Factors:
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About the Company BILIPL was originally incorporated in January 1937, as The Madras Enamel Works Ltd in Chennai (Tamil Nadu) and renamed as Rank Investments and Credits (India) Ltd in May 1995. In 2006, the Barclays group bought the Chennai-based company and commenced operations in March 2008. The company’s name was changed to Barclays Investments and Loans (India) Ltd in June 2008. The name has now been changed to BILIPL with effect from April 4, 2018. Barclays PLC owns 100% of BILIPL’s paid-up equity capital through Barclays Bank PLC (57.84% equity stake in BILIPL) and Barclays Mauritius Overseas Holdings Ltd (42.16%) as on March 31, 2021. Barclays Mauritius Overseas Holdings Ltd is in turn wholly held by Barclays Bank PLC.
Barclays PLC, founded in 1896 and headquartered in London provides various financial products and services in over 40 countries, through its subsidiaries. It offers personal and business banking services, credit cards, transactional and other lending products, and investment products and services. The company also provides financial advice, primary capital raising and capital markets execution, wealth management services, sales and trading, risk and liquidity management, and consumer payments
BILIPL reported a profit after tax (PAT) of Rs 23 crore on total income of Rs 110 crore in first half of fiscal 2023, against Rs 60 crore and Rs 175 crore, respectively, in fiscal 2022. |
Key Financial Indicators
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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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Criteria Details
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