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- Diversified business profile & group synergies
Abans group is globally diversified organization engaged in Financial Services, Gold Refining, Jewellery, Commodities Trading, Agricultural Trading and Warehousing, Software Development and Real Estate. The group is founded by Mr. Abhishek Bansal who leads a global team of qualified people operating businesses from multiple locations including India, United Kingdom, Dubai, Shanghai, Hongkong, Mauritius and Singapore.
Abans Holdings represents the financial services arm of the Abans Group. Headquartered in India, Abans Holdings is engaged in diversified global financial services business providing NBFC services, global institutional trading in equities, commodities and foreign exchange, private client stock broking, depositary services, asset management services, investment advisory services and wealth management services to corporate houses, institutional and high net worth clients. The varied financial services businesses of Abans Group are mainly organized as Finance Business which comprises NBFC operations housed under Abans Finance Private Limited and is primarily focused on lending to private traders and other small and medium businesses involved in the commodities trading market; Agency Business under which the group offers various institutional and non-institutional trading services, wealth management and private client brokerage services, mainly in equity, commodities and foreign exchange; Capital and Other businesses looks after internal treasury operations which manages the Groups capital funds. The companies maintain positions in physical as well as exchange traded commodities and other instruments. The business also includes providing Warehousing Services to commodity market participants.
Acuité believes that Abans Holdings consolidated business profile will be supported by expertise of seasoned professional managing the operations and established track record of operations.
- Comfortable capitalization and gearing levels
At group level, Abans group capitalization levels were comfortable marked by networth of Rs. 735.66 crore as on March 31, 2022. The networth is supported by equity capital of Rs. 9.27 crore; non-controlling interest of Rs. 104.53 crore and P&L account of Rs. 472.16 crore. The networth also comprises Equity component of compound financial instrument amounting to Rs. 109.10 crore. Overall gearing levels of Abans group remained low with debt majorly comprising of Secured & Unsecured MLD issued by Abans Finance Private Limited (AFPL) - NBFC. The Group might look forward to leverage its position and raise further debt for expanding its NBFC operations supported by its comfortable capitalization levels. AFPL (standalone) also has adequate capitalization levels marked by overall CAR of 21.11 percent as on March 31, 2022 (as on June 30, 2022 CAR stood at 35.35 percent). At standalone level, ASPL’s capital structure is marked by networth of Rs. 23.52 Cr. and a gearing of 0.45 times as on March 31, 2022.
Abans Holding Limited has also filed DRHP with SEBI for initial public offering. The company is offering 1.28 Cr. of equity shares at face value of Rs. 2 each comprising 25.53 percent of fully diluted paid up equity of the company Abans Holding Limited.
Acuité believes that the company’s comfortable capitalization levels will support its growth plans over the medium term.
Abans Holdings reported total gross operating income from key business verticals of Rs. 118.38 Cr. for FY2022 as compared to Rs. 154.61 Cr. in FY2021 and Rs. 135.64 Cr. in FY2020. The businesses at Group level are categorized as Finance Business, Agency Business, Capital Businesses and Others. Finance Business comprising Interest Income contributed ~27.83 percent towards gross total operating income for FY2022, Agency Business comprising Income from Fees, Brokerage and other Financial Services contributed ~14.48 percent, Capital Business comprising Gross Profit from Internal Treasury Operations and Investment & Dividend Income contributed ~52.15 percent and ~5.38 percent towards gross total operating income for FY2022 respectively. The Warehousing and other Operating Income are clubbed under Others with a contribution of ~0.16 percent.
The Group reported PAT of Rs. 61.84 Cr. for FY2022 as compared to Rs. 45.90 Cr. in FY2021 and Rs. 77.45 Cr. for FY2020. RoAA stood at 5.17 percent as on March 31, 2022 (3.83 percent as on March 31, 2021). Going forward, the Group businesses would be focused towards building itself as an Asset Management Company.
At Standalone level, ASPL reported a PAT of Rs. 1.74 Cr. for FY2022 as compared to Rs. 1.35 Cr. in FY2021. ASPL is engaged in cash & carry arbitrage. Cash & Carry arbitrage involves buying/selling of an asset wherein, such asset/commodity has a pricing difference in the cash/spot markets and its derivative in the futures market. Net gain on fair value changes comprising net gains realized on sale of derivatives held for trade & on sale of investments was the major component of total revenue for ASPL at Rs. 4.95 Cr. for FY2022.
Acuité believes that despite in improvement in Abans Holdings earning profile, its business operations would remain susceptible to inherent risks in commodities market and overall economic environment.
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- Risks involving general economic and market conditions
Abans Group was impacted by Covid pandemic which resulted in a decline in physical commodities trading activities as a significant portion trades were dependent on economic activities in the commodities supply chain, all of which have been affected due to the nationwide lockdown that had been imposed from time to time. The Group’s activities were further affected by introduction of Tax Collected at Source (TCS) under GST regulation.
General economic and market conditions in India and globally also have a significant impact on the revenue profile of Abans group. Their income sources are highly dependent upon the levels of activity in the securities, currency & commodities markets in the countries in which they operate namely India, United Kingdom, China, Singapore, Mauritius and the UAE. Any adverse change in global economic and political conditions may impact, amongst others, the volume of financial assets traded, the prices and liquidity in the commodity market.
Also, revenues generated from businesses like broking, wealth management, private client broking and investment advisory business, are directly related to the volume and value of the transactions. Any adverse market movement (downturn) would result in decline in transaction volumes leading to a decline in the group’s revenues received from commissions earned from such businesses.
Acuité believes that while most of the broking companies have witnessed significant traction in broking volumes during FY2021 on account of sharp rebound in capital as well as commodity markets, the same may not be sustainable. While the Group continues to benefit from its business model the level of activity in the commodities markets will be key determinant of its revenue profile and future growth trajectory.
- Risks involved in trading activities
Abans Group is also involved in trading in the physical bullion and agricultural commodity markets with delivery based local wholesalers/ traders in order to hedge the group’s exchange traded instruments exposures etc. These physical transactions represent the group’s sale and purchase of goods and are dependent on a limited number of counter parties for dealing in these kinds of transactions. The top ten parties represent more than 90% of the total sale and purchase of physical commodities. Although, Abans has only been dealing with known counterparty but, this exposes Abans towards risk of over dependence on a limited number of counterparties. The inability to mitigate such risks could adversely affect the group’s operations and financial conditions going forward. ABSPL is engaged in cash & carry arbitrage. In cash and carry arbitrage, the acquisition cost of the underlying is certain; however, there is no certainty with regards to its carrying costs. However, the cash & carry arbitrage mitigates the trading risks to certain extent.
Acuité believes that the ability to manage the tradeoff between various risks such as market risk and operational risk and the returns is critical to the maintenance of a stable credit risk profile.
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