Rationale

 While arriving at the rating, ICRA has considered the consolidated financials of Prabhudas Lilladher Advisory Services Private Limited (PLAD) or the PL Capital Group. It has taken a consolidated view of PLAD and its subsidiaries, including Prabhudas Lilladher Financial Services Private Limited (PLFS) and Prabhudas Lilladher Private Limited (PLPL), given the operational and business synergies in addition to the shared name and management experience. PLFS serves as the lending arm and primarily offers loan against shares (LAS) facilities to the Group’s retail, high-net-worth individual (HNI) and corporate clientele, while PLPL is mainly engaged in securities broking. The rating factors in the Group’s long track record, with a diversified presence in capital market and allied businesses, and its adequate profitability as well as capitalisation. It witnessed a moderation in its performance amid industry headwinds in the current fiscal, following the improvement in preceding years. Profitability from core operations was impacted in 9M FY2026 primarily by the increase in employee-related expenses amid the scale-up of teams and senior-level additions. Additionally, subdued market trends impacted gains/trading income on proprietary investments, which weighed on the headline profit. Notwithstanding the moderation in profitability, it remained adequate with profit after tax (PAT)/net operating income (NOI; net broking and fee income (after reducing for referral and commission payouts) along with net interest income, but excluding trading income, fair value gains, dividend income, and other non-operating income) of 14% and an annualised return on equity (RoE) of 9%. This was better than the average RoE of 3.6% recorded over FY2015-FY2023, a period during which the Group’s performance remained subdued. The rating is also supported by the Group’s augmented capitalisation profile with a net worth of Rs. 322 crore and gearing of 1.0 times as on December 31, 2025, following the equity raise of Rs. 90 crore since April 2024. The loan book of PLFS, the non-banking financial arm (NBFC) arm of the Group, stood at Rs. 115 crore as on December 31, 2025. The asset quality remained healthy in recent years, with negligible credit costs. Although PLFS witnessed a modest slippage from one of its legacy exposures in 9M FY2026, its net non-performing advances stood modest at 0.2% as on December 31, 2025. The company’s financial performance remained weak in 9M FY2026 with a return on assets (RoA) of 1.8% and RoE of 2.9% compared to 1.2% and 2.0%, respectively, in FY2025. PLFS’ capitalisation profile is characterised by a net worth of Rs. 119 crore and gearing of 0.6 times as on December 31, 2025. Its borrowing profile remains concentrated, relying on a limited lender base and intercorporate deposits (ICDs). The rating remains constrained by the modest scale of operations and the Group’s exposure to the evolving regulatory environment, intense competition, and risks inherent in capital market-related businesses. Its legacy asset quality issues, pertaining to sticky debtors and non-performing loans, have been cleaned up with the write-off of stressed exposures in recent fiscals. However, its investment book, comprising mid and small cap companies (18% of consolidated net worth as on December 31, 2025), remains exposed to the inherently volatile capital markets and may be a drag on the headline net profit on account of the mark-to-market impact amid subdued market trends in recent months. The rating also considers the credit and market risks associated with the margin trading facility (MTF) and capital market-related lending businesses, given the nature of the underlying assets.