Rating Rationale
July 21, 2020 | Mumbai
Credit Suisse Finance India Private Limited
Ratings Reaffirmed 
 
Rating Action
Rs.175 Crore Non Convertible Debenture (Reduced from Rs.225 Crore) CRISIL AAA/Stable (Reaffirmed)
Rs.600 Crore Commercial Paper Programme CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the debt instruments of Credit Suisse Finance India Private Limited (CSFIL). CRISIL has withdrawn its ratings on the non-convertible debentures of Rs 50 crore (See Annexure 'Details of Rating Withdrawn' for details) of the company as they have been redeemed. The withdrawal is in line with CRISIL's policy of rating withdrawal.
 
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.
 
The ratings of S&P Global Ratings on Credit Suisse AG reflect the bank's high level of capital to absorb losses as a going concern; stable and low-risk earnings from wealth management and Swiss retail, private and corporate banking; demonstrated asset quality; and a highly collateralised lending book. These strengths are partially offset by the elevated market and operational risks because of the large share of capital market-related businesses, and lesser geographical diversity in its wealth management business compared with peers.
 
The nationwide lockdown declared by the Government of India from March 25 till May 31, 2020, to contain the spread of the Covid-19 pandemic has impacted disbursements and collections of financial sector entities. While the lockdown restrictions have been eased, any delay in return to normalcy will exert further pressure on collections and asset quality of these entities. Additionally, any change in the behaviour of borrowers on the payment discipline can affect the delinquency levels.
 
On the liability side, the Reserve Bank of India announced regulatory measures under 'Covid-19 - Regulatory Package', whereby lenders were permitted to grant moratorium on bank loans. CRISIL understands that CSFIL is not availing of any moratorium on its bank loans. On the asset side, 0.05% of CSFIL's borrowers have availed the moratorium.
 
The company has comfortable liquidity, with cash and equivalent of Rs 630 crore as on June 30, 2020, against debt obligation of Rs 100 crore over the next 4 months.

Analytical Approach

For arriving at its ratings, CRISIL 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's ratings on CSFIL's debt instruments factor in the expectation of strong support from Credit Suisse AG (rated 'A+/Stable/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. These strengths are partially offset by the company's small scale of operations.

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:
* Expectation of strong support from the parent
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.
 
Credit Suisse AG, as part of its strategy announcement in October 2015, will accelerate its growth in the Asia Pacific (APAC) region by allocating more capital to a dedicated, integrated APAC division. Under this division, India, along with Japan, Australia, and South Korea, will be key growth markets for the Credit Suisse group, where a target-market-specific strategy is being deployed.
 
Under this plan for India, 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, and debt syndication.
 
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.
 
* Comfortable capitalisation
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, 2020, CSFIL had a high tier-I capital adequacy ratio1 of 106.9% of risk-weighted assets, with networth of Rs 2,063 crore (98.34% and Rs 1,950 crore, respectively, as on March 31, 2019). 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 0.2 time as on March 31, 2020 (0.2 time a year earlier). Capitalisation of CSSIL is adequate, with networth1 of Rs 1,806 crore as on March 31, 2020 (Rs 1,420 crore a year earlier).
 
Credit Suisse AG's ability and willingness to infuse capital whenever required will continue to support combine's capitalisation.
 
Weakness
* Small scale of operations:
Compared to other capital-market-related asset-financing companies, CSFIL's operations are relatively small; loan portfolio was Rs 1,173 crore as on March 31, 2020 (Rs 1,157 crore a year earlier). However, CSSIL houses the group's institutional equities division, which began operations in early 2007. The company now ranks among the leading foreign brokerage houses in India.
Liquidity Superior

Liquidity is comfortable, with cash and equivalent of Rs 1045 crore as on June 30, 2020, which should sufficiently cover debt obligation of Rs 100 crore over the next four months. Furthermore, liquidity is supported by need-based support from Credit Suisse AG.

Outlook: Stable

CRISIL 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
* Reduction in expected support to CSFIL by Credit Suisse AG or downgrade in the ratings of Credit Suisse AG by one or more categories
* Weakening asset quality resulting in pressure on profitability, and sustained losses.

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, and debt syndication. Loan portfolio was Rs 1,173 crore as on March 31, 2020 (Rs 1,157 crore as on March 31, 2019).
 
CSFIL reported profit after tax (PAT) of Rs 107 crore on a total income of Rs 190 crore in fiscal 2020 against PAT of Rs 112 crore on total income of Rs 200 crore in fiscal 2019.
 
CSSIL is into institutional broking and is a registered merchant banker and portfolio manager. It reported PAT1 of Rs 368 crore on total income1 of Rs 797 crore for fiscal 2020, against Rs 258 crore and Rs 611 crore, respectively, in the previous fiscal.

1As per unaudited financial fiscal 2020.

Key Financial Indicators -  CSFIL
As on/for the period ended March 31 Unit 2020 2019
Total assets Rs crore 2525 2272
Total income Rs crore 190 200
Profit after tax Rs crore 107 112
Gross NPA % Nil Nil
Adjusted gearing Times 0.2 0.2
Return on assets % 4.5 5.0

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs.Crore) Complexity level Rating outstanding with outlook
NA Non-convertible debentures^ NA NA NA 175 Simple CRISIL AAA/Stable
NA Commercial paper programme N.A N.A 7-365 Days 600 Simple CRISIL A1+
^Yet to be issued
 
Annexure - Details of Rating Withdrawn
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Complexity level Issue Size (Rs.Crore)
INE996L07122 Non-Convertible Debenture 25-Jul-2018 8.7675% 26-Jul-2019 Simple 50
 
Annexure - List of Entities Consolidated
Entity consolidated Extent of consolidation Rationale for consolidation
Credit Suisse Finance (India) Pvt Ltd Full Operational, financial and managerial linkages, along with shared brand
Credit Suisse Securities (India) Pvt Ltd Full Operational, financial and managerial linkages, along with shared brand
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  600.00  CRISIL A1+  29-05-20  CRISIL A1+  29-05-19  CRISIL A1+  11-09-18  CRISIL A1+  14-12-17  CRISIL A1+  -- 
                03-07-18  CRISIL A1+       
                29-03-18  CRISIL A1+       
Non Convertible Debentures  LT  0.00
21-07-20  		CRISIL AAA/Stable  29-05-20  CRISIL AAA/Stable  29-05-19  CRISIL AAA/Stable  11-09-18  CRISIL AAA/Stable  14-12-17  CRISIL AAA/Stable  CRISIL AAA/Stable 
                03-07-18  CRISIL AAA/Stable  04-05-17  CRISIL AAA/Stable   
                29-03-18  CRISIL AAA/Stable       
Short Term Debt (Including Commercial Paper)  ST                  04-05-17  CRISIL A1+  CRISIL A1+ 
All amounts are in Rs.Cr.
Links to related criteria
Rating Criteria for Finance Companies
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Mapping global scale ratings onto CRISIL scale

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