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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 310.00 | ACUITE AA | CE | Stable | Reaffirmed | - |
| Total Outstanding | 310.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE AA (CE)’ (read as ACUITE double A credit enhancement) on the Rs. 310.00 crore bank facilities of Tipsons Financial Services Private Limited (TFSPL). The outlook is ‘Stable’. Rating Rationale The rating factors in established presence of Tipsons Group in the capital market, TFSPL’s large and reputed client network, its management expertise and the adequate liquidity buffers. The rating further factors in the benefits arising from the strength of the structure and the underlying pledge of highly liquid securities while arriving at the rating. Acuité also takes into account in established presence of Tipsons Group in the Indian capital market and the longstanding relationship with various clients. The rating is however, constrained on account of marginal growth in trading volume by ~2.23 percent y-o-y (Rs 34,187.86 Cr as on March 2024 vis-à-vis 33427.20 Cr as on March 2023. Also, the company’s total income remained moderate at Rs 78.39 Cr as on March 2024 ( Rs 78.21 Cr as on March 2023) and reported PAT of Rs 27.17 Cr for FY2024 (Rs 26.52 Cr for FY2023). Moreover, at a consolidated level, profitability and the net worth of the group has grown by 9.10% and 17.51% respectively in FY2024. Further, the rating is constrained on account of income volatility as a result of a dependence on debt market volumes, low margin and highly competitive scenario in merchant banking industry. While the company holds investments only for a shorter duration, it is exposed to some price risk in its investment and treasury portfolio. |
| About the Company |
| Incorporated in 1993, Gujarat based TFSPL, promoted by Mr. Dilip Shah and Mr. Jitendra Shah, is a SEBI registered Category–I Merchant Banker and provides financial services including GSec & bond trading, Investment banking, corporate advisory services, equity & commodities trading and mutual fund distribution etc. through its PAN India presence. TFSPL is the group’s flagship company and is amongst the top 10 leading players in G-Sec and bonds trading in India. It primarily provides intermediary services for fixed income securities (largely G-Sec and corporate bonds) to reputed clients in the financial sector viz. banks, mutual funds, insurance companies, provident funds, pension funds, trusts and corporate treasuries etc |
| About the Group |
| The inception of Tipsons dates back to 1993. Tipsons is a SEBI registered organization which has embedded itself as a national level financial conglomerate by making its presence in most of the financial services segments including Merchant Banking, Fixed Income Services, Investment Banking, Equity Broking, Commodity Broking, Currency & Interest Rate Derivatives, Wealth Management etc. |
| Unsupported Rating |
| ACUITE A-/Stable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has taken consolidated view on the business and financial risk profile of Tipsons Financial Services Private Limited, Tipsons Consultancy Services Private Limited (TCSPL), Tipsons Stockbrokers Private Limited (TSBPL), Tipsons Commodities Private Limited (TCPL), Times Comtrade Private Limited (Times) and FinCred Investment Private Limited and has further factored in the benefits arising from the strong structure while arriving at the rating. The suffix (CE) indicates credit enhancement arising from the strength of the structure and the underlying pledge of highly liquid securities. The strength of the underlying structure and continued adherence to the same is central to the rating. |
| Key Rating Drivers |
| Strength |
| Established presence in Capital Market Tipsons Consultancy Services Private Limited (TCSPL) is promoted by Mr Dilip Shah and Mr Jitendra Shah. Mr Dilip Shah has more than 28 years of experience across various sectors. Mr. Jitendra Shah is an engineer and has more than 25 years of experience in various segments. Incorporated in 2010, Gujarat based TCSPL, is a SEBI registered Category–I Merchant Banker and provides financial services including G-Sec & bond trading, Investment advisory, Issue underwriting and portfolio management service etc. through its PAN India presence. TCSPL benefits from the established presence in the Indian capital markets and long standing relationships with various clients. TFSPL functions as an intermediary for its clients to buy and sell debt securities, both Government and private. Its network and market intelligence enable it to offer solutions to its clients which mostly comprise banks, mutual funds, insurance companies, provident funds, pension funds, trusts and corporate treasuries etc. TFSPL’s net worth stood at Rs. 240.05 Cr. as on March 31, 2024. Acuité believes that Tipson’s group presence in the domestic capital market and established relationships with various clients and investors should support its business risk profile over the near to medium term. Strength of underlying structure The structure being assessed envisages an aggregate borrowing limit of Rs. 310.00 Cr. in the form of cash credit from the bank secured by pledge of underlying bonds and securities. The underlying securities will be government securities and corporate bonds rated AAA and above within overall limit of Rs. 310.00 Cr. The bank has also stipulated differential margin for different category of securities to be purchased under this arrangement. The government securities purchased by the company will be held in a designated Constituent Subsidiary General Ledger (CSGL) Account and a joint depository participant account for corporate bonds, which will be duly pledged to the bank. The limits as sanctioned by the bank stipulates purchase of only Government securities and corporate bonds rated AAA. The joint holding of the account facilitates for strict monitoring at the lenders end with respect to transactions. The bank stipulates margin requirement in the range of 5 percent to 15 percent (depending on the nature of the security i.e. lowest margin for risk-free securities like G-Sec). The stipulations also include the options available to the lender in case of a margin shortfall. The securities pledged against which funding would be provided is restricted to Government securities and Corporate Bonds rated AAA and requires its inclusion in the lenders bank preapproved list thus providing an effective mitigation of credit risk at the initial stage of selecting securities for trade purposes. The structure further provides for shorter duration of the securities held like in case of securities outstanding in CGSL account for more than 30 days would not be reckoned while calculating drawing power. Hence, the exposure to credit risk is limited to the period the security is held and the structure facilitates for a shorter duration. Acuité believes that the structure sanctioned by the lender provides for adequate covenants to safeguard the interest of the lenders. The lenders have adequate buffers available to initiate corrective action and mitigate the risk arising out of any adverse market movements. The strict adherence to the sanctioned terms and conditions is central to the rating. |
| Weakness |
| Moderate Financial Performance; albeit improving The company reported an increase in trading volume to Rs 34,187.86 Cr as on March 2024 vis-à-vis Rs 33,427.20 Cr as on March 2023). The growth might be subdued as compared to previous years on account of overall market activities in wholesale debt market because of dip in overall market volumes and pressure on interest rates. The company’s total income improved to Rs 78.39 Cr as on March 2024 ( Rs 78.21 Cr as on March 2023) and reported PAT of Rs 27.17 Cr for FY2024 (Rs 26.52 Cr for FY2023). Susceptibility of performance to optimal management of credit and market risks Tipsons Consultancy Services Private Limited business performance is linked to the level of activity in the bond markets which in turn is linked to the overall economic activity. The volumes in the debt capital market are influenced by economic cyclicality and other macroeconomic factors such as GDP, growth rate, inflation, movement in interest rates and policy actions adopted by RBI. TFSPL generally engages into buy and sell transactions on behalf of its clients which comprise provident and pension funds, mutual funds, banks, etc. Most of the purchases of the securities are simultaneously sold to its clients. As a prudent strategy, TFSPL prefers to minimize the holding period in respect of any securities which significantly mitigates the associated credit risk and market risk. However, since a complete matching and synchronization of purchase and sale orders may always not be feasible, TCSPL will always be required to maintain certain inventory at any point of time. This exposes the company to certain credit and market risk. The risk assumed by TCSPL depends on nature of the security, volatility in the price of the security and the period of the holding. The timely churning of the portfolio also becomes important. Occurrence of significant credit events such as credit cliffs i.e. sharp deterioration in credit quality, may often result in a material decline in the bond prices and impact the liquidity of the counter. Such events could also trigger demands for accelerated payments by lenders in case of pledge-based borrowings. Besides trading of bonds, the company also has revenue streams from broking business, which is linked to the level of investment activities in the markets and also to the other factors such as regulatory environment. Since the investments held by the company are offered as collateral in this structure of pledge-based borrowings, the continued acceptability of the investments and margin requirements also have a bearing on the financial flexibility of the company. Besides market related factors, changes in bank’s policies regarding the investments offered as collateral can also impact the performance and financial flexibility of the company. Acuité believes that the ability to manage the trade-off between various risks such as credit risk, market risk and operational risk and the returns is critical to the maintenance of a stable credit risk profile. |
| Assessment of Adequacy of Credit Enhancement (Applicable only for CE Ratings) |
| The structure provides for adequate covenants to safeguard the interest of the lenders and has adequate buffers available to initiate timely corrective action and effectively mitigate the risk arising out of any adverse market movements. |
| ESG Factors Relevant for Rating |
| Tipsons Group 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 debt capital market 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. The Group maintains adequate disclosures with respect to the various board level committees mainly Audit Committee, Nomination and Remuneration Committee along with Risk Management Committee. The Group also maintains adequate level of transparency with regards to business ethics issues which can be inferred from its policies relating to code of conduct, whistle blower protection and related party transactions. In terms of its social impact, the Group is making contributions to funds working towards socio economic development, environmental sustainability, eradicating poverty and promoting sanitation. |
| Rating Sensitivity |
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| All Covenants |
| TFSPL is subject to covenants stipulated by its lender in respect of parameters like capital structure. |
| Liquidity Position |
| Adequate |
| TFSPL has maintained adequate margins through a mix of fixed deposits and lien marking of current account. As on March 31, 2024, TFSPL had cash and cash equivalents of Rs.7.90 crore providing adequate liquidity cover. The net worth of the company as on March 31, 2024, stood at Rs. 240.05 Cr. providing adequate buffer to meet any requirements in case of any credit events. Besides providing for margin money it also provides adequate buffer to meet any working capital requirements. |
| Outlook |
| Stable |
| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| 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 • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.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 • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm • Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm • Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.htm |
| Note on complexity levels of the rated instrument |
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||||||||
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