| Credit Suisse Finance India Private Limited | ||||
| Ratings Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the debt instruments of Credit Suisse Finance India Private Limited (CSFIL).
On August 1, 2022, S&P Global Ratings (S&P) reaffirmed its long-term issuer credit rating on Credit Suisse AG (parent) of ‘A’ while revising the outlook from ‘Stable’ to ‘Negative’. Consequently, the issuer rating of Credit Suisse AG is now ‘A/Negative/A-1’. The rating action is driven by the firm's poor second-quarter performance, aggravated by a very challenging market environment, which has also triggered a change in leadership. In S&P’s view, widespread changes to senior management along with increasing risks to the stability of bank’s franchise and lack of clear strategy confirm the depth of the problem.
S&P believes the group already had to tackle reducing revenue base due to ongoing de-risking activities, various litigation, restructuring and refinance costs, coupled with challenges to strengthen the earnings contribution from its international wealth and asset management business. The negative outlook reflects the setbacks the company could face in redesigning its strategy, with new management, in order to transform the bank in an increasingly difficult operating environment. S&P expects significant execution risk in stabilizing the bank’s franchise with improved and sustainable risk-adjusted profitability and reduced tail-risks to earnings.
The ratings reflect the expectation that CSFIL will continue to be held mainly by Credit Suisse AG and that support, if required, will be made available to CSFIL by Credit Suisse AG. The ratings also factor in the company’s comfortable capitalisation and strategic importance since India is one of the company’s key growth areas. Moreover, CSFIL remains the flagship entity for the group’s lending and debt syndication activities in India. These strengths are partially offset by the company’s small scale of operations.
Under the Reserve Bank of India (RBI) Resolution Framework 1.0 and 2.0 for Covid-19-related stress, the Credit Suisse India has not done any restructuring as on March 31, 2022. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of CSFIL and Credit Suisse Securities (India) Pvt Ltd (CSSIL), which is into institutional broking and investment banking. CSFIL and CSSIL are together referred to as ‘the combine’. There are significant operational linkages between the companies in the Credit Suisse group.
CRISIL Ratings’s ratings on CSFIL’s debt instruments factor in the expectation of strong support from Credit Suisse AG (rated ‘A/Negative/A-1’ by S&P Global Ratings). CSFIL is owned by Credit Suisse Investment Holdings (Mauritius) Ltd (CSIHML), which in turn is wholly owned by Credit Suisse AG, the group’s main operating company.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
CSFIL was acquired by Credit Suisse AG in July 2008, and there has been no change in the holding structure since then. Credit Suisse AG is also the holding company for most of the international subsidiaries of the Credit Suisse group. The holding structure should remain unchanged over the medium term, and Credit Suisse AG will continue to provide capital support to CSFIL through CSIHML. Additionally, the parent has stated that it will ensure CSFIL meets all its financial obligations fully and on time.
CSFIL is strategically important to Credit Suisse AG’s India operations given that it remains the flagship entity for the group’s lending and debt syndication activities in the country. CSFIL’s target business segments include promoter financing, acquisition financing, loans against shares, margin financing.
Furthermore, CSFIL benefits from continued strong management, branding, funding and operational linkages with Credit Suisse AG’s India branch. CSFIL’s board has representation from Credit Suisse AG’s senior management in India, and the latter is involved in strategic decision making. CSFIL’s risk management policies are in line with the risk management policies and processes of Credit Suisse AG’s India branch.
Credit Suisse AG extends operational and financial support to the combine, thereby helping it remain adequately capitalised for its current scale of operations. As on March 31, 2022, CSFIL had a high tier-I capital adequacy ratio of 109.7% of risk-weighted assets, with networth of Rs 2,268 crore (103.9% and Rs 2,165 crore, respectively, as on March 31, 2021). The parent has infused around Rs 1,260 crore into CSFIL since July 2008. CSFIL’s capitalisation should remain comfortable for the parent’s proposed scale of operations in India.
CSFIL also has a conservative financial policy, with gearing remaining at 0.1 time as on March 31, 2022 (0.03 time as on March 31, 2021). Capitalisation of CSSIL is adequate, with networth of Rs 1,754 crore as on March 31, 2022 (Rs 1,497 as on March 31, 2021).
Credit Suisse AG’s ability and willingness to infuse capital whenever required will continue to support combine’s capitalisation.
Weakness:
Compared to other capital-market-related asset-financing companies, CSFIL’s operations are relatively small with a loan portfolio was Rs 2,003 crore as on March 31, 2022 (Rs 1,948 crore as on March 31, 2021). However, CSSIL houses the group’s institutional equities division, which began operations in early 2007 and now ranks among the leading foreign brokerage houses in India. |
Liquidity: Superior Liquidity is comfortable, with cash and equivalent of 650 crore as on July 31, 2022 against debt obligations of Rs 50 crores till October 30, 2022. Furthermore, liquidity is supported by need-based support from Credit Suisse AG. |
Outlook: Stable CRISIL Ratings believes Credit Suisse AG will maintain majority ownership in CSFIL and continue to provide strategic, financial, and management support over the medium term. CSFIL is also likely to maintain a healthy financial risk profile. |
Rating Sensitivity factors Downward factors
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About the Company CSFIL, formerly Bokadia Marketing and Finance Pvt Ltd, was acquired by Credit Suisse AG in July 2008. The parent has infused around Rs 1,260 crore in CSFIL since the acquisition. Target business segments include promoter financing, acquisition financing, loans against shares, margin financing. Loan portfolio was Rs 2,003 crore as on March 31, 2022 (Rs 1,948 crore as on March 31, 2021).
CSFIL reported profit after tax (PAT) of Rs 102 crore on a total income of Rs 178 crore in fiscal 2022 against PAT of Rs 102 crore on total income of Rs 153 crore in fiscal 2021.
CSSIL is into institutional broking and is a registered merchant banker and portfolio manager. It reported PAT of Rs 257 crore on total income of Rs 653 crore in fiscal 2022 against Rs 97 crore and Rs 435 crore, respectively, in fiscal 2021. |
Key Financial Indicators CSFIL
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
^yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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