­­Gujarat based, Marwadi Shares and Finance Private Limited (MSFL) was incorporated by first generation entrepreneurs Mr. Ketan Marwadi, Mr. Deven Marwadi and Mr. Sandeep Marwadi in 1992 with an objective to provide financial services to meet the emerging needs of the investor community. The Company became a corporate member of the National Stock Exchange of India (NSE) in 1996 and launched depository services of Depository Participant under National Securities Depository Limited (NSDL) in 1999. MSFL has a branch network of around 110 branches and franchise/sub-broker network of around 486. 

­­­Acuite has taken standalone business and financial risk profiles of Marwadi Shares and Finance Limited to arrive at the rating.

­­Marwadi Shares & Finance 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 behaviour. 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. The company’s board comprises of a total of nine directors out of which two are independent directors and two are female directors. MSFL maintains adequate disclosures with respect to the various board level committees mainly audit committee, nomination and renumeration committee along with stakeholder management committee. MSFL also maintains adequate level of transparency with regards to business ethics issues like related party transactions, investors grievances, litigations, and regulatory penalties for the company, if relevant. In terms of its social impact, MSFL is actively engaged in community development programmes through its CSR committee.
 

• ­Business volumes & operating performance
• Any changes in management and ownership pattern
• Changes in regulatory environment

­MSFL is subject to covenants stipulated by its lenders/investors in respect of minimum networth stipulation.
 

­­­MSFL has bank facilities comprising of bank guarantee and overdraft facilities, which are used for margin requirements. The bank guarantee has 100 percent utilization levels, while overdraft facilities have low utilization level. The company had a cash and bank balance of Rs 112.60 Cr. as on December 31, 2022. As on December 31, 2022, the company had BG limits of Rs. 2144 Cr. and OD facilities of Rs. 130 Cr. Acuité believes the liquidity position will remain adequate in the near to medium term.
 

­­­Acuité believes MSFL 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.
 

­­­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.