Rationale

 The ratings factor in Standard Chartered Securities (India) Limited’s (SCSIL) parentage in the form of Standard Chartered Bank (UK) (SCB UK; rated A1 (Stable)/P1 by Moody’s Investors Service). In addition to the shared brand name, which supports its financial flexibility, SCSIL benefits from board supervision, the prudent risk management systems adopted from the Standard Chartered Bank (SCB) Group’s global practices, and operational synergies with the Group in the form of customer sourcing, cross-selling, and access to Standard Chartered India’s retail clientele and branch network. The ratings also consider SCSIL’s adequate capitalisation and liquidity profile for the current scale of operations. With the ramp-up in the company’s debt-funded margin trading facility (MTF) loan business, borrowings have increased, and the gearing rose to 1.0 times as on March 31, 2024, from 0.6 times as on March 31, 2023. While the scale of the MTF loan book and associated funding requirements through commercial paper (CP) borrowings depend on market conditions and can be volatile, the MTF book and gearing level are expected to increase compared to the historical average. SCSIL also remains exposed to credit and market risks on account of the MTF loan book, given the nature of the underlying assets. SCSIL’s scale of operations and profitability indicators remain modest and its business profile has limited diversification with the broking as well as the MTF business being dependent on capital markets. This exposes the company to the risks associated with market volatility. The intense competition in the retail broking space is likely to keep the yields under pressure. Going forward, SCSIL’s ability to scale up its client base and broking volumes, while ensuring that the asset quality of the MTF book is adequate, would be imperative for improving its profitability. The Stable outlook indicates ICRA’s expectation of continued benefit from the company’s parentage.