'P1+' rating to I-Sec's short-term debt

MUMBAI: CRISIL has assigned 'P1+' rating to the Rs 100 crore short-term debt of ICICI Securities and reaffirmed 'AAA/Stable' on the company's Rs 50 crore bond issue.

CRISIL's rating reflects ICICI Securities' strategic importance to its parent, ICICI Bank. The rating is also supported by I-Sec's strong market position in derivatives and retail online broking, strong monitoring and risk management systems, adequate capitalisation, and improved earnings profile.

These rating strengths are, however, partially offset by uncertainties that are inherent to equity broking, and the company's high costs of borrowing.

I-Sec provides broking services to institutional and retail clients in the cash equity and derivatives markets. It also acts as ICICI bank's distribution arm for insurance, mutual fund, and loan products.

CRISIL believes that ICICI Bank's 100 per cent ownership of I-Sec, and I-Sec's close linkages with group companies that are market leaders in their businesses, imply a high degree of moral obligation on the parent to support the subsidiary in the event of distress.

I-Sec continued to depend heavily on high-cost cash credit facilities and short-term borrowings in 2006-07.

However, CRISIL believes that I-Sec will substitute high-cost cash credit facilities with cheaper short-term and long-term borrowings from the capital markets.

CRISIL believes that I-Sec's strong brand image, distribution network, and market reach will enable it to sustain its market position in equity broking over the medium term.

Profitability may, however, be volatile, depending on market conditions and I-Sec's growth plans. The outlook may be revised to 'negative' if there is a dip in the extent of support from ICICI Bank or significant deterioration in I-Sec's risk management and monitoring levels.