CRISIL assigns highest short term rating to JM Financial & Investment Consultancy Services Private Limited

21 Sep 2005

1

Rs. 6.8 Billion Short Term Debt Programme P1+ (Assigned)

CRISIL has assigned a P1+ rating to the Rs6.8-billion short term debt of JM Financial & Investment Consultancy Services Private Limited (JMFICS)

The rating is driven by the company's strong linkages with the JM Financial group of companies which has a leading presence in various capital market related businesses. It also reflects the JM Financial group's strong market position in business segments in which it operates and the consequent diversity in its revenue streams.

CRISIL believes that the JM Financial group has reasonable capitalisation levels in context of the funding needs of diverse business activities, which are primarily fee-based. The rating also takes cognizance of the adequate risk management systems put in place by the group for its various capital market activities like margin financing and public issue financing.

These strengths are somewhat offset by the fact that margin financing is an initiative that has been only recently commenced. The inherent risks and volatility in securities-based lending and the high expected leverage levels to be reached by JMFICS also tempers the rating to an extent. JMFICS would maintain a high leverage on an on going basis, estimated at around 3 times' consolidated net worth. At the time the public issue finance book is open, the leverage could be higher at around 10 times for a temporary period of around 20 days per public issue.


JMFICS is fully owned by Nimesh Kampani along with family members and family owned / controlled investment companies. JMFICS commenced public issue financing about two years ago and now proposes to raise funds to finance the JMMS group's public issue financing and margin financing activities. JMFICS has recently been registered with Reserve Bank of India as a non banking finance company. JMFICS's consolidated net worth was Rs668.4 million as at March 31, 2005 and it recorded a PAT of Rs16.5 million on a total income of Rs45.2 million for the year FY2004-05 on a standalone basis.

JMFICS was founded in 1973 by the Nimesh Kampani family. JMFICS has two wholly owned subsidiaries, along with which it holds 49 per cent stake in JM Financial Ltd, which in turns holds 49 per cent in JM Morgan Stanley Securities Private Limited — an entity engaged in institutional broking. JM Morgan Stanley Pvt Ltd (JMMSPL), a key group company, is engaged in investment banking, Mergers and Acquisitions and advisory services. JMMSPL's two wholly owned subsidiaries — JMMS Retail Services Pvt Ltd and JM Morgan Stanley Fixed Income Securities Private Limited, are engaged in equity broking, wealth management, distribution of financial products and broking of debt instruments.

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