Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil BBB/Stable/Crisil A3+’ ratings on the bank loan facilities of Rs 350 crore of Religare Broking Limited (RBL).

 

RBL offers a full range of retail-focused broking services (equity, commodity, and currency). It also offers other ancillary services like distribution of Bonds, Mutual Funds, and other financial products, selling of insurance policies as an IRDAI registered corporate agent , facilitation of various services including financial inclusion services and citizen e-services etc. under the e-governance business. RBL is a wholly owned subsidiary of Religare Enterprises Ltd (REL).

 

RBL has a wholly owned subsidiary - Religare Digital Solutions Ltd (RDSL) which was incorporated on April 7, 2022 with the objective to carry out the e-governance and financial inclusion business. RBL has filed a Scheme of Arrangement with the Hon’ble National Company Law Tribunal (NCLT) for transfer and vesting of its Business to RDSL, on a going concern basis by way of a slump sale[1]. This approval is yet to be received. Apart from RDSL, RBL has one more subsidiary – Religare Commodities Limited (RCL)

 

The ratings factor in the adequate capitalization of RBL with regard to its scale of business, its long-track record of operations and adequate risk management systems. These strengths are partially offset by the modest market share of the company in the equity broking segment, its average earnings profile and susceptibility to intense competition and uncertainties inherent to capital market business.

 

For the first nine months of fiscal 2025, RBL had an overall market share of 0.02% with its market share within the cash segment being 0.32%. As on December 31, 2024, RBL reported net worth of Rs 270.46 crore and a comfortable gearing of 0.5 time, thereby supporting the financial risk profile. For fiscal 2024, RBL reported profit after tax (PAT) of Rs 33.34 crore translating to a return on equity (RoE) of 14.22% % vis-a-vis a PAT and RoE of Rs 9.61 crore and 4.51%, respectively, for the previous fiscal 2023. For the first nine months of fiscal 2025, the company reported a PAT of Rs 19.90 crore with an annualized RoE of 10.19%.

 

The ratings also consider the fact that RBL continues to operate independently with very limited synergy with the parent – REL. Further, it remains ringfenced from any legal obligations or actions relating to another subsidiary of its Holding company. In the past, REL has extended capital support for growth plans of RBL, also reflective in the comfortable gearing position of the latter. Crisil Ratings expects RBL and REL to operate on an arm’s length basis over the medium term with the latter continuing to extend strategic guidance and capital support to RBL as its promoter.

 

Further, Crisil Ratings has taken note of the change in ownership of REL, and the potential reconstitution of the board that may follow. On February 19th and 20th , 2025, the Burman Group – through its acquiring entities M.B. Finmart Private Limited, Puran Associates Private Limited, VIC Enterprises Private Limited, and Milky Investment & Trading Company [collectively referred to as the Burman group acquiring companies] - announced the conclusion of its open offer for sale made to the public shareholders of REL in terms of the SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 2011. Following this, the Burman group acquiring companies have been classified as promoters of REL and now hold a 25.16% stake in REL. Developments stemming from this change in ownership, especially around board constitution and oversight and, any impact of this on RBL’s standalone profile, will continue to be monitored very closely.

 

[1]This transaction is in accordance with Section 2(42C) read with section 50B of the Income Tax Act, 1961

Analytical Approach

To arrive at the ratings, Crisil Ratings has analysed the standalone business, financial and managerial risk profiles of RBL.

Key Rating Drivers & Detailed Description

Strengths:

• Adequate capitalization in relation to the current and planned scale of operations: As on December 31, 2024, RBL reported net worth of Rs 270.46 Crores as against Rs 250.50 crore as on March 31, 2024. Correspondingly, gearing remained comfortable at 0.5 times as on December 31, 2024, and 1.4 times as on March 31, 2024. This metric is expected to remain within 1-2 times on a steady state basis. Further, capitalization has also been supported by REL’s track record of supporting RBL through equity infusion and inter-corporate lines of credit. Since inception, the company has raised around Rs 230.80 crore as equity capital from REL. This, along with sustained internal accruals, should support the company’s capital position over the medium term.

 

• Long track record of operations in the capital market business: The company has an established track record of operations in the equity broking and trading segments. Over the years, it has scaled its operations and currently functions through a network of 69 branches, 1400+ broking business partners and 51000+ e-governance franchisees in 400+ cities across India.  The broking business and the E-governance business were earlier housed under Religare Securities Ltd (RSL), then a wholly owned subsidiary of REL. Post the restructuring at group level, the broking business of RSL was transferred to RBL, while its investment portfolio was transferred to REL. Subsequently, as part of this scheme, approved by the National Company Law Tribunal (NCLT) on December 8, 2017, RSL was subsumed into REL.

 

The company is spearheaded by a professional management team with an average experience of over 15 years in the financial services industry. The company’s established track record of operations should aid its business growth on a steady state basis.

 

• Adequate risk management systems: RBL has adequate risk management systems, which support the business risk profile of the company. The company endeavors to adhere to all the Securities and Exchange Board of India (SEBI) and exchange-prescribed regulations by instilling requisite systems and processes. The company sets client trading limits upfront and monitors client exposure on a real-time basis. It also sets scrip-wise exposure limits to keep a check on illiquid scrips or scrips under any kind of surveillance. The upfront margin along with peak margin is collected necessarily and clients are required to maintain an adequate margin as prescribed by exchanges. In case of adverse/volatile price movements, real-time risk-based square off can be initiated at any time during the day.

 

Weaknesses:

• Modest market share in the broking segment: RBL, though a seasoned player in the securities industry, had a market share of 0.32% (0.38% for fiscal 2024) in the cash segment and 0.02% (0.02% for fiscal 2024) in the futures & options (F&O) segment basis volumes for 9M 2025. While the company has a long track of operations, its services have remained focused on its existing client base with very gradual traction in new clients. In the recent past, the company has expanded its product suit by offering a variety of financial products and services within the retail broking and investment space. This is expected to support its future growth prospects.

 

• Average, albeit improving, earnings profile: For the first nine months of fiscal 2025, income from brokerage & depository services formed (56.68%) of the total income followed by income from e-governance business (11.46%), interest income (27.71%) and balance by other sources like National Pension System -Point of Presence (NPS-POP), commission income, recovery of transaction fees, etc.

 

RBL reported a net profit of Rs 33.34 crore translating to a return on equity (RoE) of 14.22% for fiscal 2024 vis-à-vis a PAT and RoE of Rs 9.61 crore and 4.51%, respectively for the previous fiscal (Profit was Rs 19.30 crore in fiscal 2022 and Rs 5.35 crore fiscal 2021). For the first nine months of fiscal 2025, the company reported a standalone PAT of Rs 19.90 crore with an annualized RoE of 10.19%. On a standalone basis, the cost to income ratio (operating expense as a percentage of total income) was 82.13% for first nine months of fiscal 2025 against 79.49% in fiscal 2024 and 84.52% in fiscal 2023. On a consolidated basis (RBL and subsidiaries), the net profit for 9M 2025 was Rs 26.86 crore as compared to a net profit of Rs 23.30 crore for the corresponding period of the previous fiscal.

 

While profitability for H1 FY25 benefited from favorable market prospects, for Q3 2025 – it remained muted on account of multiple regulatory changes including the SEBI circular on derivative trading, continued selling by  foreign institutional investors (FIIs), and persistent negative market sentiment. This led to a 20% - 25% decline in average daily turnover across both the cash and F&O segments for the quarter.

 

Historically, the company’s revenue base has been concentrated around broking business, which is subject to market volatility. However, RBL is actively working to diversify its income streams for greater stability across business cycles. To enhance revenue diversification and support long-term growth, the company is expanding its product suite, offering a wide range of financial products and services within the segments like retail broking, investment, and financial inclusion. Early signs of these measures can be evidenced from a growing stream of distribution income – which marked a year-on-year growth of 54% over nine months ended December 31, 2024.

 

• Exposure to intense competition and risk of regulatory changes: The business of RBL is confined to the capital market industry, which is intensely competitive with multiple players offering low-cost products. The broking industry has seen a huge transformation in the past decade, with technology-based discount brokers entering and dominating the market. The management of RBL is undertaking several steps to generate scale-based growth and restore its market position in the retail brokerage space and other allied services. The company's broking business also remains exposed to economic, political and social factors that drive investor sentiments. The ability to maintain a resilient business model and grow market share while managing competition will be a key monitorable.

 

In terms of operating landscape, the broking industry has been witnessing a series of regulatory revisions over the last few years. To enhance transparency, curb misuse of funds and safeguard investor interests, Securities and Exchange Board of India (SEBI) has introduced several new changes / guidelines. These include the margin pledge/re-pledge mechanism, daily client collateral reporting and collateral allocation at clearing corporations , and upfront margin collection requirements for intraday positions. SEBI has approved blocking of funds facility for trading with UPI mandate in secondary markets, similar to the Application Supported by Blocked Amount (ASBA) facility already available for the primary market, and prohibition on use of client deposits for availing bank guarantees (BG) by brokers, in order to prevent misuse of client funds, broker defaults and consequent risk to investor capital. This is similar to the Application Supported by Blocked Amount (ASBA) facility already available for the primary market, which ensures movement of money only when an allotment happens.

 

Recently, SEBI has introduced a slew of measures on Equity derivatives trading, with a three-pronged intent. One, raising entry barriers for transacting in derivatives, thereby controlling retail participation, by hiking futures and options contract sizes and mandating upfront premium collections from option buyers. Two, curbing market volatility due to speculative activity close to expiry dates by limiting weekly index derivatives offered by exchanges to one each and removing the margin benefit available on offsetting positions across different expiries on the expiry day. Three, controlling and building a cushion for risk by mandating intraday monitoring of position limits and requiring additional margins on short options contracts on the expiry day. These changes are being implemented in a phased manner. This is in addition to the exchange announcing the flat fee structure for transaction charges which is further expected to impact derivatives volumes.

 

With increasing compliance intensity, the associated cost is expected to increase. Crisil Ratings understands that most top brokers, as well as some mid-sized broking companies, have streamlined their systems in accordance with revised regulations. However, this could impact on small and mid-sized brokers with not-so-advanced information technology infrastructure and risk management systems.

 

Fundamentally, while these revised regulations will benefit the broking industry in the long term by increasing transparency and lowering risk for customers, the changes do increase the compliance cost for brokers and require them to adapt their business models to keep pace.

Liquidity: Adequate

RBL’s total cash and bank balances stood at Rs 669.45 crore as on December 31, 2024, of which Rs 22.57 crore was cash and bank balance and remaining was in the form of lien marked fixed deposits (FDs) pledged with banks (against bank guarantees and other credit facilities) and stock exchanges for margin purposes. The unutilized margin offers adequate liquidity cushion to RBL in case of any eventualities.The company also has an unutilized bank line limit of Rs 102.79 crore (including overdraft against fixed deposit of Rs 57.79 Crore) as on December 31, 2024.

Outlook: Stable

Crisil Ratings believes RBL will continue to maintain healthy capitalisation metrics while benefiting from its long-standing presence in the capital market space and adequate risk management systems. The ability to improve its market position and profitability will have to be monitored.

Rating sensitivity factors

Upward factors

• Cost-to-income ratio (operating expense/ total income) improving to, and remaining below, 60% on a steady-state basis - leading to improvement in overall earnings profile.
• Significant and sustained improvement in market share

 

Downward factors

• Weakening of the earnings profile or cost-to-income ratio (operating expense/ total income) increasing to and remaining above 85% for a prolonged period
• Deterioration in capitalization metrics

About the Company

‘RBL’, a wholly owned subsidiary of Religare Enterprises Limited, provides a comprehensive range of services to retail clients. RBL is a member of all major stock exchanges in India & registered depository participant with both NSDL & CDSL. The broking business was started by Religare group more than 25 years ago and currently, offers a full range of broking services such as equities, commodities, and currencies, depository participant services, distribution of bonds, mutual fund & other investment products etc., besides selling insurance policies as an IRDA registered Corporate Agent and offering research capabilities to its customers. 

 

RBL is also registered with Pension Fund Regulatory and Development Authority (PFRDA) and SEBI to act as Point of Presence (PoP) for National Pension Scheme (NPS) and Registrars to an issue and share Transfer Agent (RTA) respectively.

 

RBL also offers government services, financial inclusion services and citizen e-services and other ancillary and allied services including but not limited to the following: Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN) and e-TDS returns, Business Correspondent for banking services, Bharat Bill Payment Systems (BBPS) & Recharges, Ticketing for airline, railways, bus or tourism through any online/ offline platform, Digital Signature Certificate and Token (DSC) and Central Record Keeping Agency Facilitation Centre (CRA-FC).

 

The company operates through a network of 69 branches, 1400+  broking business partners and 51000+  e-governance franchisees in 400+ cities across India. It has more than 1 million broking clients.

Key Financial Indicators

As On/ period/ year ended	Unit	Mar’24	Mar’23	Mar’22
Total assets	Rs crore	1,304.62	1,004.73	973.62
Total income	Rs crore	369.01	287.89	280.99
Profit after tax	Rs crore	33.34	9.61	19.30
Cost to income (total income)	%	79.48%	84.69%	86.11%
Cost to income (total net of interest expenses )	%	86.75%	92.15%	90.90%
Return on net worth^	%	14.22%	4.41%	9.28%
Gearing	Times	1.35	1.05	0.69

 ^On an annualized basis

 

As On/ period/ year ended	Unit	Dec’24	Dec’23
Total assets	Rs crore	969.91	1,236.00
Total income	Rs crore	295.04	258.06
Profit after tax	Rs crore	19.90	19.07
Cost to income (total income)	%	82.13%	81.51%
Cost to income (net of interest expenses )	%	90.24%	89.29%
Return on net worth^	%	10.19%	11.19%
Gearing	Times	0.50	0.92

 ^On an annualized basis