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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.00 | ACUITE B+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 4.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding | 10.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE B+’ (read as ACUITE B plus) on the Rs. 6.00 crore bank facilities of Khandwala Securities Limited (KSL). The outlook is ‘Stable’.
Acuité has reaffirmed the short-term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs 4.00 crore bank facilities of Khandwala Securities Limited (KSL). Rationale for the rating The rating continues to factor in the strength derived from the experienced management led by Mr. Paresh Khandwala having experience of more than four decades in this industry. The rating derives strength from the established track record of operations, the company has been in the operations for more than 25 years.The rating also factors in improved Operating Income which increased to Rs 8.70 Cr. as of March 31,2024 from Rs. 6.26 Cr. as of March 31,2023. The rating is however, constrained due to its modest scale of operations resulting in headwinds in sustaining profitability.KSL has reported a PAT of Rs. 0.17 Cr. as of March 31,2024 vis-à-vis Rs 0.44 Cr. as of March 31,2023.The rating is also constrained due to KSL’s susceptibility to the level of volatility in the capital markets as well as highly competitive landscape in broking business from the new age digital share broking companies. |
| About the Company |
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Incorporated in 1993, Khandwala Securities Ltd (KSL) is a Mumbai based company, engaged in providing capital market products and services such as share broking, investment banking and investment advisory services. The company is led by Mr. Paresh Khandwala, having more than four decades of experience in the industry. KSL is a member of Bombay Stock Exchange (BSE) & National Stock Exchange (NSE), and offers equity, equity derivatives, currency derivatives, NSE debt market, merchant banking and portfolio management services. The equity shares of the company are listed with BSE and NSE. The company is also a category I merchant banker registered with SEBI.
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| About the Group |
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Khandwala Securities Ltd has an Associate company named Trumonee Financial Limited.This Associate company was incorporated in 2008. The company is engaged in security broking. The registered office of the company is in Mumbai. The present directors of the company are Mr. Paresh Jayantilal Khandwala, Mr. Pranav Paresh Khandwala and Ms. Bhagyashree Pranav Khandwala.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered a consolidated business and financial risk profile of Khandwala Securities Limited, which includes its associate Trumonee Financial Limited to arrive at the rating.
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| Key Rating Drivers |
| Strength |
| Established track record and experienced management:
KSL a Mumbai based company is majorly engaged in providing capital market products and services, the equity shares of KSL are listed with BSE and NSE. The company is also a category I merchant banker registered with SEBI. Under capital market products it offers equity, equity derivatives, currency derivatives, NSE debt market, merchant banking and portfolio management services. The company is promoted by Mr. Paresh Khandwala having experience of more than four decades in the capital market industry. It is reflected in its long track record of operations and long-term relationship with its institutional clients. The company also has a diversified product offering in different segments – institutional equity, Investment banking, investment advisory and private wealth management services. Acuité believes that KSL will continue to benefit from experienced management and established track record of operations. |
| Weakness |
| Modest scale of operations
KSL is present in the market for over 27 years; however, its operations remain modest, resulting in low profitability. Its operating income stood at Rs.8.70 Cr. as of March 31,2024 as compared to Rs.6.26 Cr. as of March 31,2023. KSL has reported a PAT of Rs. 0.17 Cr. as of March 31,2024 vis-à-vis Rs 0.44 Cr. as of March 31,2023. The company believes that with resolution of some pending cases will enable to improve its scale of operations and profitability over the medium term. Acuité believes that KSL's ability to improve its scale of operations and its profitability will remain a key monitorable. Risks involving general economic and market conditions The company is exposed to intense competition in the broking industry, since broking is a highly volatile and cyclical business with the presence of a large number of established players who provide significant competition to the other fragmented and small players. The company's operating performance is linked to the capital markets, which are inherently volatile as they are driven by economic and political factors as well as investor sentiments. 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.While the Group continues to benefit from its business model the level of activity in the equity, commodities and F&O markets will be key determinant of its revenue profile and future growth trajectory. Given the competition from larger brokerages and technology-focused new entrants, the ability of the group to grow its brokerage revenues on a sustainable basis will be a key monitorable. Acuité believes that the level of activity in the capital markets will continue to be a key determinant of its revenue profile and future growth trajectory. |
| ESG Factors Relevant for Rating |
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Khandwala Securities Limited, has a diversified revenue stream with a majority portion accruing from the financial services sector. Adoption and upkeep of strong business ethics is a sensitive material issue for the financial services business linked to capital markets to avoid fraud, insider trading and other anti-competitive behavior. Other important governance issues relevant for the industry include management and board compensation, board independence as well as diversity, shareholder rights and role of audit committee. As regards the social factors, product or service quality has high materiality so as to minimise misinformation about the products to the customers and reduce reputational risks. For the industry, retention, and development of skilled manpower along with equal opportunity for employees is crucial. While data security is highly relevant due to company’s access to confidential client information, social initiatives such as enhancing financial literacy and improving financial inclusion are fairly important for the financial services sector. The material of environmental factors is low for this industry. KSL maintains adequate disclosures with respect to the various board level committees mainly audit committee, nomination and renumeration committee along with stakeholder management committee. KSL also maintains adequate level of transparency with regards to business ethics issues like related party transactions, investors grievances, litigations, and regulatory penalties for the group, if relevant.
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| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
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KSL has bank facilities comprising of bank overdraft and bank guarantee, which are largely used for the capital market business. The company had cash and cash equivalents worth Rs 0.06 crore as on March 31, 2024.
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| Outlook:Stable |
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Acuité believes KSL will maintain a ‘Stable’ business risk profile over the medium term. The company will continue to benefit from its experienced management. The outlook may be revised to ‘Positive’ in case the company registers healthy growth in revenues, while achieving sustained improvement in operating margins and certain growth prospects in the brokerage business. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| None |
| Key Financials (Consolidated) | ||||||||||||||||||
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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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• Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm |
| Note on Complexity Levels of the Rated Instrument |
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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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1. Khandwala Securities Limited 2. Trumonee Financial Limited |
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Contacts |
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About Acuité Ratings & Research |
