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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 69.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding | 69.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the Rs. 69.00 crore bank facilities of A K Services Private Limited (AKSPL). The outlook is ‘Stable’.
Rationale for the Rating The rating continues to reflect benefits AKSPL derives from presence of the AK Group in domestic debt markets and established relationship with diversified investor base. The rating also factors in prudent capital structure of AKSPL with networth of Rs 43.94 Cr. gearing at 2.55 times respectively as on March 31, 2023. The rating is constrained by susceptibility of the company's performance to counterparty risk and volatility in capital markets. |
| About the company |
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Mumbai based, AKSPL was incorporated in 1986 and is directly owned by Mr. A K Mittal and family having ~99.7 percent holding as on March 31, 2023. The company is a financial services company engaged in debt advisory and dealing in Fixed Income Market securities. The company primarily undertakes exposures linked to underwriting activity of A K Group of companies.
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| About the Group |
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Mumbai based, A. K. Group is promoted by Mr. A K Mittal who has more than two and a half decades of experience in the fixed income market in India. The group’s flagship company ‘AK Capital Services Limited’ (AKCSL) is a registered merchant banker since 1998 and investment advisor. AKCSL, along with its subsidiaries, is engaged in investment advisory, merchant banking, non-banking financial operations and financial advisory services along with rendering wealth management services. AKCSL is listed on BSE and is 71.50 percent held by promoter and promoter group as on March 31, 2024.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has taken the standalone view on AKSPL’s business and financial profile and has further factored in group support of A. K. Group. The group support is on the back of common promoter, i.e. Mr. A K Mittal, shared brand name and significant operational synergies with A K Group. A K Group refers to the flagship company A K Capital Services Limited (AKCSL) along with its subsidiaries, namely, A K Capital Finance Limited, A K Stockmart Private Limited, A K Capital (Singapore) PTE. Limited, A K Capital Corporation Private Limited, Family Home Finance Private Limited and A. K. Wealth Management Private Limited.
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| Key Rating Drivers |
| Strength |
| Benefits derived from association with AK Group
A K Group has a presence of over two decades in the debt markets and is one of the leading players. The promoters of the group have demonstrated their expertise in merchant banking and financial advisory services. The group commenced operations from Corporate Bond Syndication and has gradually diversified its franchise by offering Loan Syndication, Project Finance, Management of Debt Public Issues and Wealth Management. The group is offering services namely Private Placement of Hybrid Instruments, QIP Management, Venture Capital Funds, Management and mobilisation of public and issues of tax-free and taxable bonds along with other services for more than 2 decades. The group has consolidated its presence in the market with its strong sourcing, structuring, underwriting, and distribution capabilities for debt issues through both public and private placements which have resulted in strong tie-ups with reputed institutional players. The group’s overall business profile is supported by A. K. Capital Services Limited (AKCSL) and A. K. Capital Finance Limited (AKCFL). AKCFL is engaged in extending corporate credit and the key offerings include Loan against debt Security, asset backed and cashflow backed financing and structured funding. AKSPL benefits from the established and diversified presence of the group in domestic debt markets. The core business of AKSPL is aligned with the activities of the group. The company initiates exposure of debt securities in the primary market and down sells it to its clients, i.e. provident funds, pension funds, Mutual funds, corporates and individuals. The company’s revenue mix also comprises of fee income which is generated from debt placements. The company reported revenues of Rs. 14.75 Cr. in FY2023 as against Rs. 12.85 Cr. in FY2022. Acuité believes that the group’s strong market presence in the domestic debt market and diversified offerings, established relationships with marquee clients and investors should support AKSPL’s business profile over the near to medium term. Prudent capital structure AKSPL is directly held by Mr. A K Mittal and family with ~99.7 percent holding. The company’s net worth as on March 31, 2023 stood at Rs. 43.94 Cr. as against Rs. 42.23 Cr. as on March 31, 2022. Out of the total borrowings of Rs. 112 Cr. as on March 31, 2023, Rs. 75.00 Cr. from A. K. Group and secured overdraft facility of Rs. 37.13 Cr. which was on an average around 70 percent utilised for six months ended Jun, 2023, which was subsequently paid off in Jun ‘23. The company as on December 2023 has only debt of Rs 50 Cr. from A K Group. The company’s gearing stood at 2.55 times as on March 31, 2023 as against 2.06 times as on March 31, 2022. Acuité expects the company to maintain a prudent capital structure over the medium term. |
| Weakness |
| Susceptibility of performance to counterparty risk and volatility in capital markets
AKSPL’s key earning assets include fixed income earning assets. Since these bonds are issued by corporates (Highly rated bonds), the company remains exposed to credit risks, i.e. risk of deterioration in the credit quality of the issuer. The occurrence of events impacting the credit quality of the issuer is likely to result in challenges in unwinding the exposures to the bond or debentures. Thereby impacting the operating performance of AKSPL. AKSPL’s business performance is also linked to the volume of activity in the capital market, especially the debt segment. The performance is influenced by economic cyclicality and other macroeconomic factors such as GDP, growth rate, inflation and expected movement in interest rates. Adverse events such as a sharp spike in inflationary pressures or hardening of interest rates could translate into muted volumes in the bond markets, thereby translating into lower transaction volumes. The volumes in the debt segment are influenced by factors such as interest rate movement, liquidity and regulatory environment. The ability to generate trading profit/sell down the securities in the portfolio in a profitable manner may be impacted, given the tight liquidity conditions and risk aversion in the debt capital market. Acuité believes that the overall performance of AKSPL will remain sensitive to risks emanating from volatile capital markets, interest rate movements and performance of its portfolio of investments. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
| AKSPL’s liquidity profile is adequate, supported by a tied up working capital limit of Rs. 50 Cr. from A K Group and the company also benefits from the back-up available in the form of liquid investments in the portfolio, which can be liquidated in case of future exigencies |
| Outlook: Stable |
| Acuité believes that AKSPL’s business and financial profile will remain ‘Stable’ over the medium term supported by benefits derived from association with AK Group as well as prudent capital structure. The outlook may be revised to 'Positive' in case of significant and sustained growth in the revenues while maintaining its profitability metrics and liquidity position. Conversely, the outlook may be revised to 'Negative' in case of deterioration in operating performance or a sharp deterioration in the capital structure. |
| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||
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*Total income equals to Net Interest Income plus other income.
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| Status of non-cooperation with previous CRA (if applicable): |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm |
| Note on complexity levels of the rated instrument |
| In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in. |
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||||||
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