|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 230.00 | ACUITE AA- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 30.00 | ACUITE AA+ | CE | Stable | Assigned | - |
| Bank Loan Ratings | 470.00 | ACUITE AA+ | CE | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 200.00 | ACUITE AA- | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 55.00 | ACUITE AA+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 20.00 | Provisional | ACUITE AA+ | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 1005.00 | - | - |
| Rating Rationale |
|
Acuité has assigned the long-term rating of ‘ACUITE AA+ (CE)’ (read as ACUITE Double A Plus (Credit Enhancement)) on the Rs. 30.00 Cr. bank facilities of Trust Capital Services (India) Private Limited (TCSPL). The outlook is ‘Stable’.
Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE Double A Minus) on the Rs.200.00 Cr. on non-convertible debentures of Trust Capital Services (India) Private Limited (TCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE Double A Minus) on the Rs. 230.00 Cr. bank facilities of Trust Capital Services (India) Private Limited (TCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE AA+ (CE)’ (read as ACUITE Double A Plus (Credit Enhancement)) on the Rs. 470.00 Cr. bank facilities of Trust Capital Services (India) Private Limited (TCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE AA+’ (read as ACUITE Double A Plus) on the Rs. 55.00 Cr. Secured Non-Convertible Debentures of Trust Capital Services (India) Private Limited (TCSPL). The outlook is ‘Stable’. Acuité has reaffirmed the long-term rating of ‘ACUITE Provisional AA+ (read as ACUITE Provisional Double A Plus) on the Rs. 20.00 Cr. Proposed Secured Non-Convertible Debentures of TCSPL. The outlook is ‘Stable’. The rating continues to take into consideration significant improvement in capitalisation levels of the Trust Group as reflected in networth of Rs. 810 Cr. as on March 31, 2022 (March 31, 2021: Rs. 475 Cr.) led by significant dividend payout by Chanakya Capital Partners, a group company enabling the Group to further scale up its volumes in its key businesses viz. merchant banking and portfolio management services which have recently witnessed improved and sustained traction. Networth further improved to Rs. 866 Cr. as on September 30, 2022. Against this backdrop, Acuité believes that the trajectory of earnings profile of the Group will be key monitorable. The rating continues to factor in demonstrated track record of operations, the Group’s competitive positioning in the domestic debt capital market and established relationships with marquee clients and investors. The Group managed 167 debt assignments of Rs. 2,87,612 Cr. translating to a market share of 47 percent in FY2021. The rating further takes into account significant pick up in debt & mutual fund business with AUM reaching Rs. 2,115 Cr. as of September 30, 2022. The strengths are partially offset by susceptibility of revenue to volatility in capital market and credit acceptance of market in terms of structures of the debt instruments. While concentration levels in the fixed investment portfolio of the Group witnessed reduction, it remained moderately high with top five fixed income investments contributing about 35 percent of total fixed income portfolio as on September 30, 2022. The rating on the Rs. 20.00 Cr. proposed NCD for TIAPL is provisional and the final rating is subject to: Appointment of a SEBI registered Debenture Trustee Execution of signing of Trust Deed Receipt of the final term sheet and confirmation from trustee regarding the compliance with all the terms and condition of term sheet. |
| About the Company |
|
Mumbai based, Trust Group is promoted by Ms. Nipa Sheth, who has over two decades of experience in the financial services industry. The Group has transitioned from a boutique investment banking firm in 2001 to a diversified financial services provider merchant banking, wealth management services, portfolio management services, and non-banking financial operations, and recently ventured into debt mutual fund business. Trust Capital Services Private Limited (TCSPL), the holding company of the Trust group was incorporated in 1994 and commenced commercial operations in 2001. The company is the flagship company of Trust group. TCSPL is a deposit based member of BSE and also a SEBI registered Stock Broker taking proprietary trading positions. TCSPL is engaged in distribution of securities to superannuation funds. The holding company of the group has two direct and four indirect subsidiaries, namely, Trust Investment Advisors Private Limited (merchant banking arm), Trust Securities Services Private Limited (Broking services), Sankhya Financial Services Private Limited (NBFC), Trust Asset Management Private Limited (AMC), Chanakya Capital Partners (a Mauritius based broking/advisory firm) and Trust AMC Trustee Private Limited.
Consolidated (Unsupported) Rating ACUITE AA- / Stable |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has taken a Consolidated view on TCSPL and its subsidiaries, namely, Trust Investment Advisors Private Limited, Trust Securities Services Private Limited, Sankhya Financial Services Private Limited, Trust Asset Management Private Limited, Chanakya Capital Partners and Trust AMC Trustee Private Limited collectively referred to as ‘Trust group’. This is because of the common promoters, shared brand name, significant operational and financial synergies between the companies.
The rating in respect of the NCD of Rs. 75.00 Cr. (issued by TCSPL) factors in the presence of a DSRA in form of 20 percent of the outstanding principal amount. DSRA needs to be maintained in the form of cash, bank fixed deposit, ‘AAA’ rated debt securities, sovereign debt securities or listed InvIT units issued by any InvIT (having a credit rating of AAA for its Senior Debt) in any combination, for the minimum duration covering the tenor of the NCDs along with the T structure. The differential in the ratings of regular bank facilities vis. a vis. the rating on the NCDs is on account of these structures. The notch-up is based on DSRA and T-n mechanism and structure being an Internal Credit Enhancement the suffix of CE is not required. |
Key Rating Drivers
| Strength |
| Long operational track record coupled with competitive position in domestic capital market Comfortable capitalisation levels boosted by substantial dividend payout Healthy and sustained traction in key businesses’ performance to support earnings profile |
| Weakness |
| Susceptible to volatility in demand in the debt capital market The revenues of the Trust group are linked to level of activity in the bond markets which in turn is linked to the overall economic activity. Any significant slowdown in the economy will result in lower demand for funds which in turn would translate to lower volumes of bond issuances. The corporate bond market in India has mostly been dominated by issuances from non-banking finance companies. Recently, the NBFC sector in India witnessed several credit events which led to reduced investor appetite, especially for the moderate quality issuers for a brief period of time. Occurrence of significant credit events such as credit cliffs i.e. sharp deterioration in credit quality, often results in a material decline in the bond prices and impacts the liquidity of the counter. Such events could trigger demands for accelerated payments by lenders in case of pledge based borrowings. The group has had exposure to certain bonds which faced credit cliffs in the recent past, however, they have been able to initiate prompt corrective action and materially curtail their exposures to these counters. The group still has certain residual exposure to low rated bonds which are expected to be illiquid till a resolution is in place for these issuers. Any significant concentration to a single bond that faces a credit cliff exposes the group to a high level of credit and liquidity risk. Top 5 bonds investment (highly rated) contribute ~35 percent of the total investment portfolio as on September 30, 2022 (Consolidated) and about 5 percent of the total investment portfolio (Consolidated) is invested in A & below rated papers (secured against immovable security). Any decision by the lender to curtail drawings/ increase margin requirements against such bonds to which the group is highly exposed will have an impact on the financial flexibility. Presently, the current levels of networth supports the Trust Group against these exposures. Acuité, therefore, believes that the group’s performance will be susceptible to volumes in the bond markets, adverse macro-economic events and ability to maintain an optimal risk return trade off in respect of its investment exposures. The group’s ability to maintain an optimal buffer of unencumbered liquid investments (liquid investments over and above the stipulated coverage)at all times will be critical. |
| Assessment of Adequacy of Credit Enhancement |
| 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 |
| Trust 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 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. Trust Group board comprises of a total of seven directors out of which two are women directors. The Group maintains adequate disclosures with respect to the various board level committees mainly Audit Committee, Nomination and Remuneration Committee along with Stakeholder Relationship 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 promoting health care by providing support for treatment of cancer patients. |
| Rating Sensitivity |
|
Level of exposure below investment grade category Unencumbered liquid investments Movement in profitability Any changes in credit quality of major investments in inventories |
| Material Covenants |
| The Group is subject to covenants stipulated by its lenders in respect of parameters like capital structure, profitability, among others. |
| Liquidity Position |
| Adequate |
| Trust group’s (Consolidated) assets as on September 30, 2022, mostly comprises of liquid investments in PSU bonds and corporate bonds. These assets are largely held for trading activities, so there is no scheduled repayment against them. The group also has moderate exposures to certain non-core assets such as advances for property, loans/investments to sister concerns. The management expects to unwind some of these exposures over the near term. The borrowings comprise a mix of pledge based overdraft, commercial paper, nonconvertible debentures (NCDs) and loans from sister concerns. The liquidity profile of the Trust Group is adequate marked by way of unutilized working capital limits stood at Rs. 207.8 Cr. (consolidated) as on September 30, 2022 and unencumbered and free securities amount stood at ~Rs. 160 Cr. (consolidated) of the total investment portfolio as on September 30, 2022. |
| Outlook- Stable |
| Acuité believes that Trust group will maintain ‘Stable’ credit risk profile over the medium term supported by the group's well-established market position in the domestic capital markets and experienced management. The outlook may be revised to 'Positive' in case of a significant and sustained growth in the scale of operations while improving its profitability and gearing metrics. Conversely, the outlook may be revised to 'Negative' in case of significant decline in operating performance of key businesses, deterioration in the credit quality of major exposures or reduction in the level of unencumbered securities or increase in debt levels (nonpledged based debt levels). |
| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
| Key Financials (Consolidated) | ||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
|
Supplementary disclosures for Provisional Ratings
A. Risks associated with the provisional nature of the credit rating In case there are material changes in the terms of the transaction after the initial assignment of the provisional rating and post the completion of the issuance (corresponding to the part that has been issued) Acuite will withdraw the existing provisional rating and concurrently, assign a fresh final rating in the same press release, basis the revised terms of the transaction. B. Rating that would have been assigned in absence of the pending steps/ documentation The rating would be equated to the standalone rating of the entity: ACUITE AA-/ Stable C. Timeline for conversion to Final Rating for a debt instrument proposed to be issued: The provisional rating shall be converted into a final rating within 90 days from the date of issuance of the proposed debt instrument. Under no circumstance shall the provisional rating continue upon the expiry of 180 days from the date of issuance of the proposed debt instrument.Policy of Acuite for Provisional Rating: https://www.acuite.in/provisional- ratings.htm |
| Applicable Criteria |
|
Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating- criteria-53.htm Commercial Paper: https://www.acuite.in/view-rating-criteria-54.htm Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.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. |
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
| Analytical | Rating Desk |
| About Acuité Ratings & Research |
